Entities linked to the segments launch a joint note in repudiation of Zanin’s injunction that overturns the tax benefit
The 17 sectors affected by the minister of STF (Federal Supreme Court) Cristiano Zanin who suspended the exemption payroll repudiated the judicialization of the matter by the government of Luiz Inácio Lula da Silva (PT). They state that, with the fall in tax benefits, there is a scenario of legal uncertainty.
In a joint note released on Friday (April 26, 2024), associations representing the affected segments say that the government’s move “puts the positive socioeconomic impacts of the measure at risk and creates a clear situation of legal uncertainty”. Read the full text (PDF – 57 kB).
The text also talks about the impact that the decision will have on employees in the 17 sectors. They claim that they were responsible for employing 151 thousand people in the first 2 months of 2024.
“The use of an extreme measure of concentrated control action puts all the concrete effects of public policy at risk, as it promotes serious tax unpredictability”they declare.
Read which sectors benefited from the extension of payroll tax relief by Congress until 2027:
Releasing a sector means that it will have a reduction or exemption from taxes. In practice, it makes hiring and maintaining employees cheaper in companies. Defenders of the mechanism say that this type of practice heats up the economy and promotes job creation.
The government called the Supreme Court to analyze the case after deputies and senators maintained the benefit to companies several times (understand below in the subtitle “comings and goings“).
The joint note defines the government’s moves as “an initiative that aims to invalidate all past and current legislative work of the National Congress”.
The sectors say they will respect the Supreme Court’s decision even with disagreements on the matter. They also cite an ongoing dialogue with the economic team to continue debating the issue.
“The 17 sectors will maintain dialogue with the powers of the Republic to address this situation of legal, economic and social insecurity, whilst maintaining respect for the legislative process already carried out and in progress”they stated in the document.
O Power360 contacted all sectors on Friday (April 26). Some mentioned specific impacts. Example: public transport companies say that the price of bus tickets may increase as tax exemptions fall.
Read the positions of 7 of them below:
- NTU (National Association of Urban Transport Companies) – executive director Francisco Cristóvão mmentioned “harm to the passenger and the user” It is “a consequent effect on tariff increases“;
- ABPA (Brazilian Animal Protein Association) – said that the injunction goes against “the repeated decisions of the National Congress on the subject”. It also says that “will impact the competitiveness of production chains”. Defends that the Supreme Court review the decision;
- Feninfra (National Call Center Federation, Installation and Maintenance of Telecommunications and IT Network Infrastructure) – stated that the opinion demonstrates “insensitivity” in relation to companies and their employees. “It is an inconsistency from a government that, historically, has always defended the banner of employment”;
- ABT (Brazilian Teleservices Association) – spoke in “very relevant legal uncertainty and tax unpredictability, to the detriment of jobs and investments”;
- Cbic (Brazilian Chamber of Construction Industry) – said that “received with concern” the rule change. “Reestablishing taxation exclusively on labor will result in a drop in competitiveness and a reduction in jobs”;
- Anatrip (National Association of Road Passenger Transport Companies) – stated that he considered the payroll tax relief “a crucial tool to promote employability in road passenger transport companies”. He declared that the benefit is important to alleviate costs and encourages greater investment in buses;
- Assespro (Association of Brazilian Information Technology Companies) – said that the exemption “has been extremely successful in generating income and jobs in the country for more than a decade”.
COMINGS AND GOINGS
The Minister of Finance, Fernando Haddad, had said in December 2023 that the issue was unconstitutional and that the government would take legal action.
Read the chronological order of the facts to understand the exemption impasse:
- 13.jun.2023 – Senate Economic Affairs Committee approves the extension of the benefit to the 17 sectors. Haddad said “not understanding the rush” in voting on the topic;
- Oct 25, 2023 – Congress approves the postponement of the tax waiver until 2027;
- Nov 23, 2023 – Lula vetoes the measure;
- Nov 24, 2023 – Haddad says he would present a “solution” for payroll tax relief after December 12, 2023;
- 14.dec.2023 – Congress overturns Lula’s veto and exemption is maintained until 2027;
- December 28, 2023 – Haddad proposes a gradual repayment of the payroll via MP (Provisional Measure) 1,202 of 2023, with effect from April 1, 2024;
- 27.Feb.2024 – Lula removes the exemption from the provisional measure sheet and sends PL 493 of 2024 with the gradual reduction;
- 9.Feb.2024 – Chamber of Deputies approves constitutional urgency regime for re-encumbrance projects;
- April 10, 2024 – without an agreement with Congress, the bill on reimbursement had its urgency regime withdrawn.
The government wants to end tax benefits for companies to increase revenue. Balancing public accounts is Haddad’s main promise during his tenure at the head of the Treasury.
TAX IMPACT
Tax relief for sectors of the economy was created during the Dilma Rousseff (PT) government. Cost R$ 148.4 billion in nominal values to public coffers from 2012 to 2023. The Luiz Inácio Lula da Silva (PT) government estimates a tax waiver of R$ 15.8 billion in 2024. In the 1st quarter of this year, the Union stopped collecting R$4.2 billion.
According to the Ministry of Finance, the biggest impact is on the land transport sector. The waiver would be R$5 billion in 2024 (or 40.8% of the total).
More than half (52.4%) of the waiver value from 2012 to 2023 was during the Dilma government. The former president granted the benefit to 56 sectors during her term, or 39 more than currently. The government of Michel Temer (MDB) reduced the number of benefited sectors from 56 to 17 since 2019. Read below what they were under Dilma’s government:
