The president of the Senate, Rodrigo Pacheco (PSD-MG), argued this Tuesday (2) that the decision to invalidate the section of Provisional Measure (MP) 1202/2023, which overturned the social security exemption for small and medium-sized city halls, had objective of avoiding “manifest legal uncertainty”. The MP, published at the end of last year by the federal government, reestablished the rate of contributions to the National Institute of National Insurance (INSS) from 8% to 20% by municipalities with up to 156 thousand inhabitants.
This new rate would start to be charged this week, according to the nineteen rule – which establishes a period of 90 days for a tax change law to come into force. However, the president of the National Congress excluded the section and extended the validity of the MP for another 60 days, as the text also addresses other points, such as the revocation of tax benefits from the Events Sector Emergency Resumption Program (Perse) and the limitation on the percentage for tax compensation for past court decisions.
“Imagine that, from the improper use of MP for this purpose [rever a desoneração aprovada pelo Congresso], we would have a reality of three months of the year with a rate of 8%, sixty days of validity of the MP with a rate of 20%. At the end of the MP’s term, return to the 8% rate, and then discuss a new model that has an intermediate rate, based on a government proposal negotiated with the municipalities. This is an unreasonable legal uncertainty”, he told journalists. The extension of the MP, with the exclusion of the reimbursement of city halls, was signed on Monday night (1st) by Pacheco.
In February, after a strong reaction from Congress, President Luiz Inácio Lula da Silva had already revoked the section that re-encumbered 17 sectors of the economy from the same MP, maintaining, however, the increase in city hall taxation and the repeal of Perse. Parliament’s dissatisfaction arose because deputies and senators had approved the extension, until the end of 2027, of the tax exemption for 17 sectors of the economy and the reduction of the social security contribution rate on the payroll of municipalities with up to 156 thousand inhabitants. The project was fully vetoed by President Lula, but Congress then overturned the veto, enacting tax benefits. Even so, the government issued MP 1202 gradually reimbursing the economic sectors and city halls, opening a political crisis with the legislators.
“Naturally, an MP that seeks to deconstitute a recently approved law is manifestly unconstitutional, this is what we have maintained from the beginning”, insisted the president of the Senate. “The payroll tax exemption issue must be addressed through the bill and not through a Provisional Measure”, reinforced Pacheco.
Just before Pacheco’s interview, the Minister of Finance, Fernando Haddad, asked for a pact between the Powers to find options that compensate for the reduction in payroll taxes for small municipalities, which will generate a loss of R$10 billion in revenue.
“Fixing public accounts requires a commitment from the Three Powers. We will not reach our goals without taking into account the disaster that happened [nas contas públicas] in 2022. We have to respect Congress’ time, but we have to raise awareness of the problem. The role of the Treasury is to provide guidance on how to organize [as contas públicas]. We need to set a goal and pursue it”, declared Haddad late this morning.
