Tax: government proposes higher taxes on cars and soda, but saves ultra-processed products

BRASILIA – Four months after the promulgation of the Proposed Amendment to the Constitution (PEC) for tax reformO government sent to the National Congress the first complementary bill regulating new taxes on consumption. The text, to which the Estadão had access, provides that the Selective Tax, called “sin tax”, will be levied on vehicle, vessel and aircraft, cigarettes, alcoholic beverages, sugary drinks It is extracted mineral assets.

In other words: ultra-processed foods were left off the list, despite the recommendation from the Ministry of Health and pressure from civil society entities.

In total, the project has 360 pages and brings the heart of the new system, which includes the functioning of the Value Added Tax (VAT, which will unify 5 taxes) and the Selective Tax, which is based on the incidence of goods and services considered harmful to health or the environment (see items below).

This is a new – and probably even tougher – battle to be fought in Congress, with a myriad of details that will be the target of various lobbies and interests, both from sectors and corporations and entities of the federation.

Not surprisingly, the Minister of Finance, Fernando Haddad, went in person, accompanied by his number 2, Dario Durigan, and the extraordinary secretary Bernard Appy deliver the text by hand to the presidents of both Houses: deputy Arthur Lira (PP-AL) and senator Rodrigo Pacheco (PSD-MG).

Among the most controversial points – which will face resistance in the Chamber and the Senate – are the selectiveThe basic basket and the differentiated regimes. In addition to all the credit system, since the reform provides for full non-cumulative taxation, which puts an end to cascading taxation and allows companies to take credit for taxes charged in the previous stage of the chain. This way, taxes would no longer apply to other taxes.

The final design of this regulation will have a direct effect on the tax rate that will be charged to consumers. The Ministry of Finance estimates a average tax rate of 26.5%which could vary from 25.7% to 27.3%, depending on factors such as tax evasion, tax avoidance (a practice that takes advantage of loopholes in the law to reduce taxation), company disputes with the tax authorities, which end up in legal litigation and , also, of default.

According to the text, the impact of selection on the acquisition of vehicles, aircraft and vessels is justified because “they emit pollutants that cause damage to the environment and humans”.

The proposal is that the rates apply to motor vehicles classified as automobiles and light commercial vehicles and vary based on a base rate, according to the attributes of each vehicle.

In total, there are six attributes, in line with the Green Mobility Program (Mover), tax incentive for the automotive sector with a focus on energy transition: vehicle power; energy efficiency; structural performance and steering assistive technologies; recyclability of materials; carbon footprint; and technological density. Therefore, the base rate for each vehicle may be increased or decreased according to the criteria.

Cars considered sustainable will have a zero tax rate. To be characterized as such, the vehicle must meet the indices of each of the following criteria: carbon dioxide emission (energy-environmental efficiency), considering the well-to-wheel cycle; vehicle recyclability; carrying out manufacturing stages in the country; and vehicle category.

The project also provides for the reduction to zero of the selective rate levied on vehicles sold to people with disabilities or to professional drivers (taxi drivers), as long as a similar benefit has been recognized within the scope of IBS (state and municipal VAT) and CBS (VAT federal).

More alcohol, more tax

In relation to alcoholic beverages, taxation will be proportional to the alcohol content, as recommended by international organizations such as the OECD, WHO and the World Bank. This was a claim from the beer industry, which has been fighting a public duel with the spirits industryas shown by the Estadão.

The producers of cachaça, gin and vodka had the objective – which will now be taken to the National Congress – of avoiding this gradual taxation, claiming that this would result in “equals being treated as unequals”.

The Ministry of Finance claims, however, in the text of the PLP, that “the negative effect of alcohol is related to the quantity consumed” and, therefore, “a model similar to that used for tobacco products is proposed, whereby taxation will be done through a specific rate (per amount of alcohol)”.

The bill provides that the return of credit acquired in the chain will take place within 60 days – that is, two months. The deadline is longer than what entities such as the National Confederation of Industry (CNI), the Brazilian Association of Public Companies (Abrasca) and the Parliamentary Front for Entrepreneurship (FPE) defended. who requested 30 daysas shown by the Estadão. In some cases, the text says, the Management Committee may authorize a faster deadline.

“For credits related to the acquisition of assets incorporated into the taxpayer’s fixed assets or accumulated up to the taxpayer’s average monthly accumulation value, the deadline for reimbursement is 60 (sixty) days. Furthermore, the IBS Management Committee and the RFB will be able to authorize even faster reimbursement for eligible taxpayers under compliance programs”, says article 84 of the project.