Tax truce and new development model
It will not be easy to end the tax warfare. In the Senate, where tax overhaul is being considered through a constitutional amendment proposal (PEC 45), some states are defending its continuation. Others are even satisfied with the end, but they are asking for a little more time to sign some last contracts with companies before the door closes.It’s called tax warfare, or race to the bottom, the practice of reducing taxes to attract companies. It’s something that has been practiced in Brazil for the last five decades, especially concerning the sales tax ICMS, the main state tax, which PEC 45 wants to completely change.It’s a difficult debate. In the end, what is on the table is a change in Brazil’s economic development model, as said by the PEC’s rapporteur, Senator Eduardo Braga. The idea is that, after the reform, the attraction for companies will be a series of budgetary and financial incentives (the government will provide funds to stimulate companies or sectors), instead of the current tax rebates.This is what PEC 45 is talking about when it states that the collection of taxes on consumption will take place in the state of destination (where the product or service is consumed) and not in the state of origin (where it is produced). Thus, the logic of giving rebates to attract companies will be less advantageous for the states, because the collection will not happen there. It’s a profound change, like going through a portal to another world.Goiás Governor Ronaldo Caiado is the most vocal opponent of this change. His state has attracted automakers and a pharmaceutical center based on tax incentives. Other units of the federation have attracted companies the same way as well.The mechanism will be missed, said the institutional director of the Committee of Secretaries of Finance of the States and the Federal District (Comsefaz), André Horta. Some fear that without this form of incentive, companies will choose places where there is more consumer market. In other words, there could be a concentration of investments.The constitutionality of tax incentives has always been questioned. In 2011, the Federal Supreme Court (STF) ruled that they did indeed violate the Constitution. In order not to provoke a hecatomb in companies that have made investment decisions based on the tax warfare, a supplementary law (160) was passed in 2017. It validates these benefits until 2032.PEC 45 provides for the creation of a fund of R$160 billion to finance state tax...
Para continuar a ler
PEÇA SUA AVALIAÇÃO