After the government presents regulations, see how the tax reform should impact everyday life | Economy

The government delivered to Congress on Wednesday (24) a tax reform regulation project. In this text, the government details some points included in the reform, approved by deputies and senators last year, but which remained pending subsequent regulation.

Now, this new stage of the reform needs to be processed again by the Chamber and Senate before becoming law. Until then, it must undergo changes in relation to the original text presented by the government.

With the text approved last year and the project presented this week, it is now possible to have a more defined idea of ​​what the reform should represent for the country.

It is common for people to wonder whether it will lower prices, reduce taxes and make life easier for consumers and businesspeople. Because it is a complex topic with many variables involved, the answers are not always simple and straightforward. But the details released in recent days show an increasingly complete scenario.

See below what changes compared to today and the possible effects on daily life:

The proposed amendment to the Constitution (PEC) already approved in Congress provides for unifying taxes on consumption into two:

▶️ Contribution on Goods and Services (CBS): will have federal management and will unify IPI, PIS and Cofins;

▶️ The Tax on Goods and Services (IBS): will have shared management between states and municipalities, will unify ICMS (state) and ISS (municipal).

These taxes will not be cumulative, unlike what happens today. Not being cumulative means that, throughout the production chain of an item, the tax will only be paid once, and not at each stage. Today, the distributor, when purchasing from the producer, pays tax. Then, the distributor sells it to the consumer, who pays tax on top of the amount already paid in the previous stage, making the final amount more expensive. This is going to end.

According to the government’s economic team, the unification of taxes will simplify Brazil’s tax model, currently considered chaotic. This simplification, according to the government, together with the non-cumulative nature, tends to reduce costs and eliminate distortions in the system. The expected effect is that companies make more profit and consumers pay less for products.

But the total value of the two consumption taxes that will unify the others has not yet been defined. The government calculates that should be something around 26%to maintain the current tax burden.

It is worth remembering that there will be a gradual transition, starting in 2026 from the current model to the model with two taxes, which will only be fully implemented in 2033.

If these taxes actually amount to a rate of 26%, it means that some products that currently pay less tax than that will start paying more. There will also be the opposite scenario: items that currently pay more will be subject to a lower tax rate.

But it is still not possible to say that the reform will make items cheaper or more expensive. The government understands that the positive effects of the reform (simplification of the tax model, end of cumulation, greater transparency in charges) will boost the economy as a whole and improve purchasing power.

Thus, even products that will be taxed at a higher rate would benefit from the effects of the reform and, in theory, should not become more expensive, according to the government. But these effects can only be seen in practice, when the new model comes into force.

Tax reform regulation comes at a time of demands from Congress

In the regulation sent to Congress, the government details a cashback system for poorer families. Thus, they would have tax refunds when purchasing the products.

In the text, the economic team recommends that this be done for families with an income of up to half a minimum wage per person (R$706, in current value). This, according to the government, would cover 73 million people.

The percentages would be as follows:

• cooking gas: refund of 100% of CBS (federal) and 20% of IBS (state/municipal);
• electricity, water and sewage: refund of 50% of CBS and 20% of IBS;
• other products: 20% refund of CBS and IBS.

This will also be implemented gradually, between 2026 and 2033.

There are three possibilities to operationalize this cashback:

• discount on water, electricity, piped gas bills, for example, directly on invoices;
• subsequent credit for the taxpayer;
• discount at the cashier, at the time of consumption (if there is operational possibility).

The regulation sent to Congress also provides tax discounts for basic basket items.

The regulation, however, provides for a smaller list of products in the basic basket compared to the current rules.

There are currently 745 different foods benefiting from tax exemption, according to a 2021 report by the Public Policy Monitoring and Assessment Committee (CMAP).

In the new format, according to the government, the list prioritizes foods effectively consumed by the low-income population.

The proposal textually excludes foods such as foie gras (goose liver, a high-cost delicacy), lobsters, crayfish and cod.

Today, taxes paid on consumption in the services sector do not reach 26%, the supposed value of future IBS and CBS.

1. administrators;
2. lawyers;
3. architects and urban planners;
4. social workers;
5. librarians;
6. biologists;
7. Accountants;
8. economists;
9. home economists;
10. physical education professionals;
11. engineers and agronomists;
12. statistics;
13. veterinarians and zootechnicians;
14. museologists;
15. chemicals;
16. public relations professionals;
17. industrial technicians; It is
18. agricultural technicians.

In addition to the general rate, of around 26% on the sum of CBS and IBS, the government proposes that some specific products be taxed even higher.

It is the so-called “sin tax”, used to discourage the consumption of goods that are harmful to health and the environment.

The list included by the government in the tax reform regulations provides for higher taxes for:

• cigarettes,
• alcoholic beverages,
• sugary drinks,
• polluting vehicles
• extraction of iron ore, oil and natural gas.

According to the Ministry of Finance’s secretary for tax reform, Bernard Appy, two other projects will still be sent to regulate tax reform. They will treat:

• the transition rules for the distribution of these collected resources to states and municipalities;
• transfers of part of these taxes to regional development funds and state loss compensation – two mechanisms negotiated by governors to deal with the impacts of tax reform.

The Treasury’s schedule predicts that the regulation will be made between 2024 and 2025.

With the end of this phase, the transition from current taxes to the Value Added Tax (VAT) model — with non-cumulative charging – may begin in 2026.