URGENT: Senate approves and Brazil is about to have the highest tax in the world

URGENT: Senate approves and Brazil is about to have the highest tax in the world
URGENT: Senate approves and Brazil is about to have the highest tax in the world
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In a decision that marks a new chapter in Brazil’s tax history, the Federal Senate approved this Wednesday the controversial Proposed Amendment to the Constitution (PEC) 45/2019, known as the Lula government’s Tax Reform. After 30 years of intense debates, the proposal was approved in the first round with 53 votes in favor and 24 against, with no abstentions. The need for 49 votes (3/5 of the House’s composition) was exceeded, paving the way for the second round of voting.

The PEC, initially proposed by deputy Baleia Rossi (MDB-SP) and later modified by senator Eduardo Braga (MDB-AM), aims to simplify the Brazilian tax system. The project foresees the replacement of five taxes (ICMS, ISS, IPI, PIS and Cofins) with three new ones: Tax on Goods and Services (IBS), Contribution on Goods and Services (CBS) and Selective Tax (IS). In addition, it promises exemptions for basic food basket products and other measures.

Rapporteur Eduardo Braga emphasized that the reform does not represent an increase in the tax burden and establishes a “lock” for the collection of new taxes, ensuring that there will be no surpluses. On the other hand, Senator Randolfe Rodrigues (Rede-AP), leader of the government in Congress, celebrated the approval of the PEC as a historic milestone, promising tax reductions for the poorest population, including total exemption from taxes on essential items such as rice. and bean.

However, the reform faces severe criticism, especially from opposition senators. The opposition leader, senator Rogerio Marinho (PL-RN), argued that the reform, in practice, will increase the tax burden for the majority of the population. He highlighted that the proposal was disfigured and criticized the granting of benefits to certain sectors, considering this a distortion of the original objective of simplification.

Concern about the increase in the tax burden is aggravated by the projection that the new Value Added Tax (VAT) rate will reach 27.5%, the highest in the world according to OECD standards. This increase places Brazil in an isolated position in the global ranking of VAT rates, surpassing even developed and emerging countries with significantly lower rates.

Tax reform is seen by many as double-edged: although it promises simplification and exemptions, the scenario of increased tax burden and differentiated regimes for certain sectors raise questions about the equity and effectiveness of the proposed tax system. The debate on the reform continues to rage, with Brazilian society and experts anxiously awaiting the next steps of this decisive legislative process.


The article is in Portuguese

Tags: URGENT Senate approves Brazil highest tax world

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