Pacheco cites separation of Powers and excludes reburdening of municipalities

The president of the National Congress, senator Rodrigo Pacheco (PSD-MG), citing the principle of separation of the Powers of the Republic, excluded the re-encumbrance of the payroll of Brazilian municipalities from the text of Provisional Measure (MP) 1,202/2023. The decision was taken by Pacheco this Monday (1st) to extend, for another 60 days, the effects of the MP, but with the overturning of the part that deals with the re-encumbrance from 8% to 20%.

The president of Congress argued that “the power to issue provisional measures cannot have the power to promptly frustrate a decision taken by the Legislative Branch”, adding that the MP would be “in clear conflict with the principle of separation of Powers”.

Published at the end of last year, this provisional measure originally intended to reburden the payroll of 17 economic sectors, in municipalities with up to 156 thousand inhabitants and also to end the tax incentives of the Events Sector Emergency Resumption Program (Perse) . The government argued that the measure was necessary to meet the target of zero fiscal deficit scheduled for 2024.

The publication of this MP generated friction with the Legislature since the National Congress had overturned, a few days earlier, the presidential veto that had barred the exemption of these taxes from municipalities and 17 economic sectors. After negotiations with parliamentarians, the government backed down and issued a new MP in February this year, excluding the re-encumbrance of the 17 economic sectors, but maintaining that of the municipalities and the changes in Perse.

According to Pacheco, according to the nineteen rule – a period of 90 days for a tax change law to come into effect, city halls would begin to suffer the effects of tax relief this Tuesday (2). Instead of the current 8% social security contribution rate on payrolls, they would be charged a 20% rate.

In a note sent to the press, Pacheco highlighted that the discussion on the topic must be carried out via a bill, and not through a provisional measure. Unlike the bill, the MP has immediate effects, despite needing to be confirmed by the Chamber and the Senate within 120 days.

“We are open to rapid discussion and the best and fairest model for Brazil. But, in fact, an MP cannot repeal a law enacted the previous day, as if it were another round of the legislative process. This guarantees predictability and legal security for everyone involved”, added Pacheco.