Jaques Wagner defends the overturning of exemptions by the STF

The leader of the Government in the Senate, Jaques Wagner (PT-BA), stated this Tuesday (April 30) that he was in favor of the decision of the STF minister, Cristiano Zanin, who suspended exemption from payroll in 17 sectors and municipalities with up to 156.2 thousand inhabitants. For him, the projects approved by Congress are unconstitutional because they affect the financing of Social Security.

“It’s not as if the government didn’t accept Congress’ decision. But, if it is unconstitutional, he has the right to go to the Power that guards the Constitution and ask them to judge”, he stated in an interview with journalists in the Senate. Jaques said that the texts – which exempt the 20% employer tax from the payroll of municipalities and 17 sectors – violate the Pension Reform, approved in 2019.

PEC 6/2019 determines that any Social Security income cannot be altered or interrupted. The senator states that the government’s interpretation is the majority in the STF (Supreme Federal Court), citing the current score to validate Zanin’s decision. “Notice that being 5-0 is not anything. The unconstitutionality is blatant”, he said. Minister Luiz Fux, however, asked for a review (more time for analysis) and interrupted the analysis of the issue in the Supreme Court.

Even so, the government must present a new proposal for the fiscal issue of municipalities and economic sectors. According to Jaques, the Ministry of Finance should present a new proposal that alleviates the tax burden without interfering with social security collections.

In the decision, Zanin says that there is no indication of the budgetary impact of the exemption and that there is a risk of a “significant imbalance in public accounts and an emptying of the constitutionalized fiscal regime”. Articles 1, 2, 4 and 5 of law 14,784/2023 were suspended. Here’s the complete of the decision (PDF – 294 kB).

In the request sent to the STF via AGU (Attorney General of the Union), however, the government does not indicate in which sectors the exemption would be unconstitutional. Mention only in areas “without adequate demonstration of the financial impact”.

The government wants to end tax benefits for companies to increase revenue and meet tax targets. The Minister of Finance, Fernando Haddadalready had signaled that it would take the issue to court.

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 exemption for small municipalities is also included in the action sent to the Supreme Court. Currently, it is valid for those with up to 156.2 thousand inhabitants. In this case, the AGU also does not cite numbers and talks about unproductivity.

The AGU action also requests that the MP (provisional measure) 1,202 of 2023 be considered constitutional. The text aimed to increase revenue through some initiatives, such as the gradual end of Persian (Emergency Events Sector Resumption Program) and exemption.