Maintaining payroll tax relief for 17 sectors of the economy and tax relief for small municipalities poses the risk of a new Social Security reform in three years, said Finance Minister Fernando Haddad this evening. He said that the 5-0 score in the Federal Supreme Court (STF) in the judgment of the injunction that suspended the exemption shows the need for agreements to avoid further damage to Social Security.
“We have been trying to talk to the [17] sectors and municipalities. The Supreme Court’s score makes it clear that we have to find a way to not harm Social Security. Or in three years you will have to carry out another pension reform, if you have no income. Social Security revenue is sacred, to pay retirees. You can’t play with this thing”, said the minister upon returning from a meeting with President Luiz Inácio Lula da Silva.
Despite the warning, the minister said he was confident in an agreement to resolve the impasse between the Executive, Legislative and Judiciary Powers. Despite recent criticism from the president of the Senate, Rodrigo Pacheco (PSD-MG), against the government for having appealed to the Supreme Court, Haddad stated that the dialogue will bring results. “Our dialogue with Congress and the Judiciary has yielded a lot of results. Pacheco continues to be an ally”, highlighted the minister.
The minister clarified an interview published this weekend by the newspaper Folha de S.Paulo, in which he charged Congress with seeking balance in public accounts. In the interview, Haddad said that Congress wants to govern in a kind of parliamentarism, without taking responsibility for the increase in spending caused by the bomb agendas.
“What I was saying in the interview is that, as Congress gained prerogatives, it was important that the same practices of respect for tax law should apply to everyone: Executive, Legislative and Judiciary, which is the pact I have been talking about since the beginning of the year. Let’s make a pact so we can settle the score and continue evolving”, concluded Haddad.
Impact
At the end of last year, Congress approved the tax relief bill that extended, until 2027, the exchange of social security contributions – corresponding to 20% of the payroll – for a rate between 1% and 4.5% on income gross income from companies in 17 sectors of the economy. The project also cut the rate of INSS contributions from municipalities with up to 156 thousand inhabitants from 20% to 8%.
The payroll tax exemption has an impact of around R$9 billion per year on Social Security. Aid to small municipalities will mean that the government will no longer collect R$10 billion per year. President Luiz Inácio Lula da Silva vetoed the project, but Congress overturned the veto in December last year.
Last week, based on an action by the Federal Attorney General’s Office), STF minister Cristiano Zanin granted an injunction suspending the tax exemption and submitted his decision to the plenary. Five of the 11 ministers voted to confirm the suspension, but Luiz Fux asked for a review and interrupted the analysis. He has up to 90 days to release the process.
Earlier, the Minister of Institutional Relations, Alexandre Padilha, met with Haddad at the Ministry of Finance. Upon leaving the meeting, Padilha said the STF’s decision creates a more conducive environment for a new middle ground between the government, Congress and representatives of the 17 sectors and city halls.
“We agreed with Haddad to continue at the municipalities’ negotiation table on the issue of social security debt. We have already started dialogue with the three entities and we will maintain this negotiation table”, highlighted Padilha.
