Lula’s tax bill brings cheaper picanha and more expensive beer

The Ministry of Finance’s tax reform regulation proposal brings a series of regimes that will have different taxation in relation to the standard rate. These include:

• beef – like the picanha, their load will be reduced by 60%. The cuts are on the list of foods benefited by the standard basic food basket. It is an attempt to make food consumed by the poorest people cheaper;
• alcoholic beverages – will be subject to IS (Selective Tax), popularly called “sin tax”. It is an attempt by the government to make access to substances considered harmful to health more difficult.

Both products were repeatedly mentioned by Luiz Inácio Lula da Silva (PT) during his presidential election campaign in 2022. He used to say that Brazilians would have easier access to beer and picanha.

The text that regulates tax reform, promulgated in December 2023, it was forwarded to the Chamber, which will begin discussions. The House may include and remove items from the national basic food basket and the “sin tax”. Here’s the complete (PDF – 2 MB).

MEAT

Beef, pork, sheep, goat and poultry meat will have IBS (Goods and Services Tax) and CBS (Contribution on Goods and Services) rates reduced by 60%.

Some types of fish will also have reduced rates. Others will be charged full tax (or 100% of IBS and CBS) – such as salmon, tuna, cod and others. Lobster and shellfish will be taxed at the full rate.

The text also contains a list of foods that will have the tax rate reset. In other words, they are even cheaper. Here are what they are:

• rice;
• milk (pasteurized, industrialized, ultra-pasteurized fluid, powdered, whole, semi-skimmed, skimmed, infant formulas);
• butter;
• Margarine;
• beans;
• roots and tubers;
• coconuts;
• coffee;
• soy oil;
• cassava flour;
• flour, groats and groats, of corn and crushed or flaked grains;
• wheat flour;
• sugar;
• pasta; It is
• common type bread.

A differentiated regime for some basic food products was established in the constitutional amendment that established the tax reform. The text now provides details of what has already been approved.

In March, tax reform working group congressmen they had presented a list with suggestions greater than what the Lula government proposed, such as all animal proteins.

“SIN TAX”

There are 6 categories selected to be subject to Selective Tax, also known as “tax on sin”:

• vehicles;
• vessels and planes;
• smoking products (cigarettes);
• alcoholic beverages;
• sugary drinks;
• extracted mineral assets.

The Selective Tax will only be levied once on the items in the categories above, and it is up to the Federal Revenue Service to manage and monitor the collection of the tax. The corresponding rates have not yet been defined and will be disclosed later in another complementary law, according to the Treasury.

According to the text, the justification for taxation on the production, extraction, commercialization or import of goods or services was the conclusion that they were “harmful to health or the environment”.

THE REGULATIONS

The Minister of Finance, Fernando Haddad, delivered on Wednesday (April 24, 2024) the main text of the tax regulation personally to the presidents of the Chamber of Deputies, Arthur Lira (PP-AL), and of the Senate, Rodrigo Pacheco (PSD -MG).

In total, there will be 3 texts: 2 complementary bills and 1 ordinary bill.

The supplements will cover:

1. specifications common to IBS (Goods and Services Tax) and CBS (Contribution on Goods and Services) – will have definitions of all specific and differentiated federal, state and municipal tax regimes. It will also determine the selective tax;
2. IBS-only specifications – will define the format of the tax management committee. It will also address the transition from the current ICMS (Tax on the Circulation of Goods and Services) to the new rate.

Only the 1st text is in the hands of the Legislature. It is considered the main one, as it contains technical specifications that tend to be more negotiable with deputies and senators.

The 3rd text – in ordinary law format – must detail how the transfer of resources to the Regional Development Fund will be made as compensation for tax benefits. It will also be left for a second moment.

UNDERSTAND TAX REFORM

In summary, the main change proposed by the consumption tax reform is the creation of 2 VATs (Value Added Tax) to unify a series of rates. The objective is to simplify the billing system in Brazil.

The change should come into force by 2033. It was instituted through a PEC (Proposed Amendment to the Constitution), approved by the National Congress in December 2023.

Brazil has 5 taxes on consumption that will be unified by VAT:

• IPI (Taxes over industrialized products);
• PIS (Social integration program);
• Cofins (Contribution to Social Security Financing);
• ICMS (Tax on Circulation of Goods and Services);
• ISS (Tax over services).

The dual VAT will consist of:

• CBS (Contribution on Goods and Services) – the merger of IPI, PIS and Cofins. It will be managed by the Union (federal government);
• IBS (Goods and Services Tax) – unifies ICMS and ISS. It will be managed shared between states and municipalities.

O Power360 prepared a report that explains in detail the tax reform and the changes it will bring to citizens’ daily lives. Read here.

Read more about tax reform regulations: