A provision in the tax reform regulation is sending shudders through supplementary healthcare companies – and could be a coup de grace for a sector already on its knees, for employers who offer health plans to their employees and for the approximately 44 million Brazilians covered by plans corporate, which represent 85% of the 52 million in the private health system.
The rule prevents companies from deducting expenditure on employees’ corporate health plans from the calculation of the new VAT.
As the likely VAT rate is 27%, if the provision is maintained, it will increase the cost of health plans for companies that offer this benefit to their employees, by the same proportion.
“I have rarely seen such a mistake in the government’s economic area, and it is not an economic mistake, it is an ideological one,” said a businessman in the sector. “If this continues, many companies will end the health plans of their workers, who will not be able to afford health insurance on their own and will return to the SUS.”
And if the employee wants to hire outside, it will hurt their pocket. Given the historical distortions in plan regulation (read adjustments always below medical inflation), the individual plan is currently offered by few insurers – and is much more expensive than the corporate plan.
The Government’s logic in creating the deduction ban is that the nature of the plans is to be a benefit to the employee – and not just any company expense, despite numerous other benefits continuing to be deductible from the calculation base.
“But if so, the meal ticket, the ergonomic chairs and the big computer screen don’t go away either – and the government isn’t going after it,” said a lawyer.
Even with plans becoming more expensive, some companies may have no other option than to continue paying for the plan. It turns out that, most of the time, the obligation to pay for the health plan derives from the collective labor agreement — which has the force of law. “In other words, these companies have nowhere to run, or there will be a war between employers, unions and justice.”
Like almost everything in Brazil, however, the new norm already has a great potential for judicialization. The tax reform PEC determines the deduction in the VAT calculation of all expenses that a company has with another taxpayer in the VAT cycle – that is, in the course of its activities; the only prohibition is for goods for personal use and consumption.
“At the moment when the regulation, which is infraconstitutional, tries to prohibit this deduction from health plans, it is already in conflict with the Constitution itself,” said a tax lawyer.
The ban on VAT deduction could be the most recent blow to a sector that has been accumulating billions of reais in operating losses in recent years.
Since 2021, health plans have already lost R$20 billion – R$7 billion in just the first nine months of last year, according to data from Abramge, which represents operators.
Lawyers who mobilize against the ban note that the great merit of the tax reform is to establish full non-cumulative tax liability in Brazil. (Today taxes are said to be non-cumulative, but this is not always true, because companies are unable to take credit for numerous expenses, such as financial expenses, advertising, investment in R&D – all because jurisprudence only authorizes the deduction of expenses incurred by “indispensable”, creating a Byzantine differentiation between what is “necessary” and what is “indispensable”.
With the ban on deduction, the tax on the health plan is no longer non-cumulative: the company paid for the plan and can no longer be reimbursed. “The government managed to create yet another jabuticaba against the economy, and this time directly against Brazilians,” said another businessman in the sector.
But for the father of the reform, the extraordinary secretary of Tax Reform, Bernard Appy, critics are creating a “tempest in a teapot.”
“[Esse impedimento] It won’t break anyone. … I am absolutely certain that everyone will continue to have the right to health insurance,” Appy said at a recent event.
When confronted about the matter, Appy also argued that prohibiting crediting would be positive to avoid asymmetries with Simples companies (which will, in general, be outside the non-cumulative system). But it was the reform itself that maintained the general asymmetry for Simples companies – therefore, what Appy points out is not a cause, but a consequence.
The impediment to deducting VAT may not even “break anyone” – even though the health status of the operators does not recommend this bet – but one thing is certain: the tax of all companies that offer plans has already increased, and further confusion could be on the way.
Geraldo Samor
