Haddad calls for a pact between Powers after the Senate president’s decision

The Minister of Finance, Fernando Haddad, requested this Tuesday (2) a pact between the Three Powers to find options that compensate for the reduction of R$10 billion from the payroll of small municipalities. Haddad commented on the Senate president’s decision, Rodrigo Pacheconot to extend for 60 days the stretch of Provisional Measure (MP) 1,202 which overturned the exemption of contributions to the National Institute of National Insurance (INSS) by city halls. The MP was published in the last days of 2023 and intended to reburden the payroll for 17 sectors of the economy. “Fixing public accounts requires a commitment from the Three Powers. We will not reach our objectives without taking into account the disaster that happened in 2022. We have to respect Congress’s time, but we have to raise awareness of the problem. The role of the Treasury is to provide guidance on how to fix it. We need to set a goal and aim for it,” he declared.

Haddad said he had not been informed by Pacheco of the decision and that the president of the Senate discussed the issue with the Minister of Institutional Relations, Alexandre Padilha. “Not for me. He spoke with Minister Padilha. Minister Padilha called me, but I hadn’t talked about it with Pacheco,” he said. As part of the agreement reached in February, the government filed a bill in the Chamber of Deputies last week to regulate the issue and reduce aid to small municipalities. However, the text is on hold because Congress is discussing the party window, the change of parties by parliamentarians before the municipal elections in October. Without the prospect of a vote anytime soon, Pacheco revoked the section of the provisional measure.

With the repeal, the government will have to find an alternative to reinforce the cash flow by R$10 billion in 2024. Another option would be to appeal to the Federal Supreme Court to question the legality of the law approved at the end of last year that extended the payroll tax exemption for 17 sectors of the economy and extended aid to small municipalities, but did not provide resources to compensate for the measures.

Perse and goals

The provisional measure that revoked the bill also provides for the gradual repeal of Perse, an aid program for companies in the events sector affected by the pandemic. The topic was also transferred to a bill. “Perse is a problem. Payroll tax relief is a problem. The issue of municipalities is a problem. I always say. You set a primary result goal and forward the laws that will give consistency to that goal. And the work we are doing with Congress is to convince parliamentarians that we need to find a source of financing for the expenses created”, he said.

The government needs R$168 billion in extra revenue to meet the target of zeroing the primary deficit in 2024, with a tolerance margin of 0.25 percentage points more or less. Haddad asked that the question about the pursuit of the fiscal target also be asked to the Legislature. “The important thing is that this question does not have to be a question just for the Executive. I know that you are sometimes embarrassed to ask questions to the people who have responsibility, but this is a pact that has to be made in the Three Powers,” he stated.

*With information from Agência Brasil