The main text of the tax reform was approved in the first round this Wednesday (8) with 53 votes in favor and 24 against. In Santa Catarina, the state government argues that the proposal “puts the autonomy” of the state at risk.
Senate voted on tax reform this Wednesday (8) – Photo: Edilson Rodrigues/Agência Senado/Reproduction
Santa Catarina senators Esperidião Amin (PP) and Jorge Seif (PL) were against and Ivete da Silveira (MDB) voted in favor of approval.
The government’s expectation is that the proposed amendment to the Constitution will be promulgated by December, after years of discussions in the National Congress.
Impacts highlighted by the Government of SC
The SEF (Secretariat of State for Finance) listed some points considered “critical” and which could affect Santa Catarina, such as:
- The need to increase the FNDR (National Fund for Regional Development) – from R$40 billion to R$75 billion – and the definition of economic criteria for dividing these resources;
- Federal transition of IBS (Goods and Services Tax) which, with the approval of the reform, replaces ICMS and ISS and becomes the responsibility of states and municipalities;
- The proposal provides for 50 years of transition which, according to the SC Government, should only be 20 years;
“It is necessary to bear in mind that, given this 50-year period, any collection effort by the State will not immediately translate into a direct increase in revenue”, says Finance Secretary Cleverson Siewert.
What the experts say
For the chief economist of FIESC (Federation of Industries of the State of Santa Catarina), Pablo Bittencourt, the tax reform “is not perfect” but it could also be “the biggest institutional advance in decades to increase Brazilian competitiveness”.
The entity’s president, Mario Cezar de Aguiar, points out that “we need to be vigilant to avoid an increase in the tax burden”.
In a note published in July – the period in which the basic text of the reform was analyzed – Facisc (Federation of Business Associations of Santa Catarina) took a position in favor, but with some reservations.
“Presumed profit companies, which are (mostly) in the cumulative PIS and Cofins system, will be the most impacted, which could result in tax increases in various sectors of commerce and services”, he states in a note. Check out the positioning in full here.
Understand the tax reform PEC
The PEC (Proposed Amendment to the Constitution) is a legislative proposition that alters the Federal Constitution and does not require sanction from the President of the Republic.
The reform simplifies Brazilian taxation, transforming five taxes (ICMS, ISS, IPI, PIS and Cofins) into three: Tax on Goods and Services (IBS), Contribution on Goods and Services (CBS) and Selective Tax.
Another novelty of the tax reform is the provision of a tax lock. The objective of the limit is to ensure that there is no increase in taxes for any sector of the economy.
Some points of the reform:
- Replace five taxes with a dual VAT (Value Added Tax)
- Creation of IPVA for jets and speedboats
- Inheritance taxation
- Maintenance of tax exemption for religious houses and charitable organizations
- Creation of a selective tax aimed at products and services that pose dangers to health and the environment, the so-called ‘Sin Tax’