Without tax relief, the country will suffer price increases and an impact on inflation, experts warn – News

The country could see inflation fluctuate if the payroll tax exemption for the 17 sectors that employ the most is not extended. The analysis of experts consulted by the report takes into account the calculation of companies and trade unions, pointing out that, without the continuation of the measure, 1 million jobs are expected to be closed and the final price of services and products will increase. President Luiz Inácio Lula da Silva has until this Thursday (23) to decide whether to sanction or veto the project.

“In fact, both jobs will be threatened and company costs will rise. One way or another, the entire national economy will suffer the impact of this change: companies will have to cut costs to balance the books, and there may be a reduction in number of employees and an increase in the value of products, which will put pressure on inflation”, says economist Werton Oliveira.

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The increase in prices for the final consumer, according to Oliveira, would result in an increase in inflation in the short term. On the other hand, with gradual layoffs, there would be a decrease in Brazilians’ purchasing power in a second moment, reducing prices, but causing harm to economic growth.

Economist and researcher at the Federal University of Paraíba Bruno Bezerra Silva also assesses an increase in inflation in the short term. The fluctuation, however, represents a negative consequence for the economy.

“Considering that there is an expectation of an increase in the unemployment rate and that the challenges for companies to operate on non-school days would increase, this is expected to negatively affect economic development”, he states.

How it works?

The exemption allows the employer to choose to replace the incidence of the employer’s social security contribution on the payroll with the incidence on the company’s gross revenue. Instead of the entrepreneur collecting 20% ​​of the employee’s payroll, the tax can be calculated by applying a percentage to the company’s gross revenue, which varies from 1% to 4.5%, depending on the sector.

The contribution does not cease to be made, it simply adapts to the real level of the enterprise’s productive activity. In other words, companies that earn more contribute more. This means it is possible to hire more employees without generating a tax increase.

If the payroll tax exemption for 17 sectors of the economy is not extended until 2027, 1 million job vacancies could be lost, according to a survey carried out by associations, trade bodies and unions. The amount corresponds to 1,023,540 positions open from January to June 2023, according to the General Register of Employed and Unemployed Persons (Caged).

Job generation

For every 10% reduction in payroll taxes, an increase of 3.4% in formal jobs is estimated. The conclusion is from a 2021 study by Fundação Getulio Vargas (FGV) based on figures from the then Ministry of Economy. The federal government survey analyzed the impact of reducing labor costs on job creation.

The sectors of the economy covered by the payroll tax exemption registered growth in job creation higher than that of areas that are not covered by the measure. According to a survey carried out based on the General Register of Employed and Unemployed Persons (Caged), from January 2018 to December 2022, the activities included in the exemption hired at least 1.2 million workers, while the other sectors opened 400 thousand jobs. job.

When the measure came into force, 56 sectors were covered, but former president Michel Temer (MDB) sanctioned, in 2018, a law that removed 39 segments from the regime. The measure would be valid until 2021 and was extended by then president Jair Bolsonaro (PL). The current exemption ends at the end of this year.

A veto interrupting the exemption, at this moment, represents a “great risk of negative impacts on the labor market”, is what economist and professor at the University of Brasília (UnB) César Bergo maintains.

“The survival of the sectors must be taken into consideration at this moment. If the president vetoes, Congress has the power to override the veto, but the biggest problem is exactly the issue of deadline. These comings and goings harm companies’ planning”, he analyzes , considering that the tax relief measure is provisional and there is a need for a tax review for all sectors.

Understand

The objective of the exemption is to partially alleviate the tax burden. The measure has been in force since 2011, and the bill provides for the maintenance of the tax regime until 2027. The matter was approved by Congress and awaits approval by President Lula.

The following sectors are included: footwear, call center, communication, clothing, civil construction, construction of infrastructure works, leather, vehicle and body manufacturing, machinery and equipment, animal protein, textile, information technology, communication technology, design of integrated circuits, metro-rail passenger transport, public road transport and road freight transport.