Minister Flávio Dino of the Supreme Court suspended the payment of more than R$4 billion in parliamentary amendments and determined that the Federal Police investigate possible irregularities in the release of these resources. The Chamber approved the regulation of tax reform, with the transition until 2033, unification of consumption taxes, and a limit of 26.5% to the general rate. The Congress enacted the PEC of spending cutting, which amends salary allowance rules and revenue detachment, and approved the 2025 LDO, with zero fiscal targets and a tolerance margin of 0.25% of GDP. Changes made by the legislature reduced the government’s predicted economy to $ 1 billion.
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PSOL Request
Minister Flávio Dino’s decision complied with a PSOL request, which pointed to irregularities in the allocation of R $ 4.2 billion in commission amendments, a modality whose execution is not mandatory, and which gained prominence after the STF declared unconstitutional amendments by the rapporteur unconstitutional.The PSOL questioned, in the Supreme, the letter that authorized the transfer of funds, sent to the Planalto Palace by the president of the Chamber of Deputies, Arthur Lira (PP), and signed by 17 party leaders. On the same day, Lira canceled all sessions of the Chamber’s Thematic Committees until 20 December, the last day of legislative work in 2025. The cancellation prevented the collegiate from deliberating on the destination of amendments, which raised suspicions about the legality of the process.
Tax Reform Regulation
The Chamber of Deputies approved on Tuesday (17/12) the first project to regulate the tax reform, with 324 votes in favor and 123 against. After adjustments made by the Senate, the rate of future unified consumption taxes should be around 27%, as estimated by the House and the Government. The text now goes to the sanction of President Lula (PT), who can still veto excerpts of the proposal.
Gradual Transition
The regulation provides for the total implementation of the new tax system in 2033, with a gradual transition starting in 2026. In the first year, there will be no new taxes, only the issuance of invoices with CBS (State) and IBS test rates (Municipal), no charge. These taxes will unify taxation on the consumption of products and services.
Sanitation and Beverage
One of the changes made by the Senate, but rejected by the House, was the inclusion of basic sanitation between the items with a reduced rate. The deputies argued that the cashback mechanism already returns the taxes paid in sanitation services to the poorest. The rapporteur in the House also included again sugary drinks in the selective tax, which establishes larger rates for harmful health and environmental products.
Medicine
The House ruled out a generic list of diseases whose drugs would have tax reduction, opting for a detailed list of active ingredients that will have zero tax or a 60% discount. As a result, virtually all medicines approved by Anvisa will benefit.
Reduced Tax Services
The original proposal of a 60% reduction for cultural, sports, recreational, language education, and training services has been removed. Only traditional education services remained focused on people with disabilities. Veterinary services, initially contemplated with a 60% reduction, will have a 30% discount.
Tax Burden Lock
A lock has been included to prevent the general IBS and CBS rate from exceeding 26.5%. If this limit is exceeded, the government must send a project to Congress to adjust taxation. The transition will be evaluated in 2031 and later revised every five years, allowing adjustments to the tax system as necessary.
Budget Cuts
On Friday (20/12), the National Congress enacted the Proposed Amendment to the Constitution (PEC) for budget cuts, which establishes new rules for salary bonuses and extends the unlinking of federal revenues, allowing the reallocation of resources previously earmarked for other areas. The PEC is part of the package of measures from the Ministry of Finance to balance public accounts. In addition, Congress approved two other texts: one that creates “triggers” to contain expenses and another that limits the real increase in the minimum wage to 2.5%.
Reduced Savings
The Legislature changed part of the measures provided for in the PEC, reducing the savings expected by the government by just over R$1 billion. The main change impacted the accounting of resources earmarked for the Fund for the Maintenance and Development of Basic Education and the Appreciation of Professionals in Education (Fundeb). Despite this, the Minister of Finance, Fernando Haddad, stated that the package will still be close to the initial projections.
Budget Guidelines Law (LDO)
On Wednesday (18/12), Congress approved the 2025 LDO, which foresees a zero fiscal target, a deficit of R$30.9 billion outside the fiscal rule, and greater autonomy for state-owned companies dependent on the Treasury. The approval occurred after almost five months of delay due to the impasse generated by the blocking of payment of amendments by the STF. The text includes a tolerance margin of 0.25% of GDP above or below the fiscal target, avoiding the obligation to freeze expenses in case of small deviations.
Analysis:
Recent political and legislative decisions in Brazil highlight the complex interaction between the executive, legislative, and judiciary branches, with significant implications for everyday life and the national political landscape. The suspension of R$4 billion in parliamentary amendments, ordered by Minister Flávio Dino of the Supreme Court, reflects concerns about ethics and transparency in the management of public resources. The investigation conducted by the Federal Police into potential irregularities in releasing these funds underscores the need for rigorous control over political negotiation tools, such as rapporteur amendments. This episode underscores the governance challenges and the impact of corruption on public confidence in democratic institutions, while also highlighting the vulnerability of the political system to questionable practices.
The regulation of the tax reform, approved in the House of Representatives, aims to simplify the country’s tax structure, promising significant changes by 2033. The gradual transition, which includes the unification of consumption taxes and a cap of 26.5% on the overall tax rate, could provide benefits by easing the tax burden on businesses and citizens. However, there are concerns about the potential impact on the cost of living, particularly for middle- and lower-income classes, given the expected high tax rates.
The PEC on budget cuts, enacted by Congress, introduces changes aimed at balancing public finances. However, the reduction in the government’s projected savings raises concerns about the funding capacity for priority areas. These changes could exacerbate social inequalities, putting increased pressure on local governments to find alternative financing solutions.
Sources: G1 [1], [2], [3]; O Globo [1], [2], [3]; A Folha de SP.
