Nearly seven months after the enactment of the Tax Reform, the Chamber of Deputies approved on Wednesday (10), by a vote of 336 to 142, the most comprehensive project to regulate changes in the country’s tax system. The legislation outlines the implementation of the Brazilian Value Added Tax (VAT), addressing key areas such as the basic basket, cashback, and reduced rates for specific goods and services while setting the standard tax rate at 26.5%. The bill now moves to the Senate for further consideration.
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Second Phase
This project marks the second phase in the extended process of fully implementing the reform. It specifies the new tax structure, replacing five existing taxes: Three federal taxes (PIS, Cofins, and IPI) will be consolidated into the Contribution on Goods and Services (CBS), under federal jurisdiction. The state ICMS and municipal ISS will be unified into the Tax on Goods and Services (IBS), managed jointly by states and municipalities.
Non-Cumulative Tax
To maintain the current tax burden, the text stipulates that the combined maximum tax rate will be 26.5%. While some items will face higher taxes and others lower, the overall tax load should remain unchanged. One significant change is the move to a non-cumulative tax system.
Animal Protein
In a last-minute decision, the Chamber included meat in the basic basket with a zero-tax rate. Initially excluded from the base text, an amendment secured full tax exemption for animal proteins.
Enhanced Cashback
The Chamber expanded the cashback mechanism, which refunds part of the tax paid by low-income families (up to half the minimum wage per person). The new text increases the federal CBS refund to 100%, with the IBS refund percentage adjustable by state. Refunds will be deposited directly into personal accounts.
Reduced Tax for Medicines
The reform includes a 60% tax reduction for popular medicines, such as anti-flu drugs, while maintaining a zero rate for medications for severe treatments. All medicines registered with Anvisa or produced by compounding pharmacies will benefit from this tax reduction.
Selective Tax
A Selective Tax, targeting products harmful to health or the environment, will have a higher rate than the standard 26% to discourage their consumption. This tax will also apply to combustion and electric cars, but trucks and firearms are exempt from this surcharge.
Nanoentrepreneur
The text introduces the “nanoentrepreneur” classification for those with annual revenues up to R$40.5 thousand. This category, earning half of what characterizes individual micro-entrepreneurs (MEI), will be exempt from future consumption taxes unless they opt-in.
Analysis:
The recent approval of the Tax Reform bill by the Chamber of Deputies marks a significant shift in Brazil’s tax landscape, poised to profoundly impact businesses, entrepreneurs, and the general population. Although the changes will not take effect immediately, with the new model coming fully into force in 2033, the reform’s progress sends positive signals to investors and businesspeople, potentially improving the economic scenario even before its implementation.
For the State, the consolidation of taxes into a VAT (Value Added Tax) system promises more efficient and simplified tax collection. The unification of federal taxes into a single CBS (Contribution on Goods and Services) and state and municipal taxes into an IBS (Goods and Services Tax) will facilitate tax management, reduce tax evasion, and improve the predictability of government revenues. This simplification can increase revenue without necessarily raising the total tax burden.
The successful implementation of this reform can strengthen the image of the current government, demonstrating its effectiveness and ability to carry out structural changes. However, the adaptation process and transition to the new system will require intense coordination between federative entities, potentially generating conflicts and political disputes over the distribution of tax revenues.
Sources: G1 [1], [2], [3]; O Globo; A Folha de SP.
