The Gazette | Tax reform: ES may have a lower rate than the country’s standard

However, the decision on this percentage also involves another planned reform, which is the income reform.

“In this reform that will come to assets and income, any gain will be converted so that there is a reduction in the reference rate. So, depending on this, we may have a lower rate. If it is something that compensates for a certain loss that we will have on goods and services, we can, suddenly, reduce the tax rate as well”, says the secretary.

Currently, Brazilian goods and services pay, on average, 34% in federal, state and municipal taxes.

VAT will replace five taxes that make up the system (IPI, PIS, Cofins, ICMS, ISS) and will be composed of the Tax on Goods and Services (IBS) and the Contribution on Goods and Services (CBS). The IBS will be managed shared by States and municipalities and the CBS by the Union.

Tax reform: ES may have a lower rate than the country’s standard

“Due to the fact that the State has organized accounts, negative debt and low commitment of net revenue to personnel, this is all favorable. While other states are having difficulties, the tendency is for them to have a higher rate to compensate for the situation”, he details.

The determination of what this rate will be should only be made in 2029. To define the state rate, a bill will be sent by the government to the Legislative Assembly, in the same way as is currently done for tax changes.

Before 2029, a fixed test rate will be defined. And, after choosing the State’s rate, it will grow progressively until 2032, until it is fully implemented. From 2029 to 2032, is the period considered to be the gradual extinction of ICMS and ISS, with a reduction in current rates by 10% each year. In 2033, the new system comes into force.

One of the changes foreseen by the tax reform is also the change in tax collection from origin to destination. Therefore, states with more consumers tend to gain more from the change. Benício Costa highlighted that for Espírito Santo, which will be impacted by this change, it is important that the federative transition is long. The project foresees a term of 50 years.

“The longer it takes, the more we will be able to dilute the effects of the change from origin to destination. So we can take time and fine-tune this transition. With less time the impact would be greater”, he states.

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