03/15/2023 – 20:35

Most of the House hearing guests who discussed international tax practices said that most modern value-added taxes (VAT) have few rates and exemptions. But at Wednesday’s tax reform task force hearing, some guests rejected the VAT as the only solution and favored an IVV, a retail sales tax, as it exists in the United States.

For Rita de La Feria, professor of tax law at the University of Leeds, in England, Brazil should take the opportunity to make a modern VAT because the experience of Europe shows that it is more difficult to change different treatments in the future. According to her, different rates create a problem of interpretation and fraud.

The reforms under consideration (PECs 45 and 110/19) replace 5 taxes (IPI, coffins, SPI, ICMS It is ISS) for a VAT called Goods and Services Tax.

Tax law specialist Marcos Aurélio Valadão agrees with the adoption of the VAT, but has suggested that the municipal ISS be replaced by a retail sales tax. This type of tax only applies to retail trade; that is, it is not like VAT, which is levied at all stages of production, but allows each stage to receive credits for the tax paid at the previous stage.

For Valadão, the replacement of the ISS by an IVV would better maintain the autonomy of the municipalities. The consultant Antônio Lício, meanwhile, defended the PEC 7, of 2020, which favors IVV over IVA. For him, VAT is bad because it depends on offset credits.

But the financial adviser of the Spanish embassy in Brazil, Francisco Gallardo, said it was possible to guarantee a quick refund of the tax paid; that is to say the end of tax accumulation. He also explained that the European example worked with different treatments for certain sectors and for small businesses.

independent entity
Melina Rocha, from the University of York, Canada, raised the need for an independent entity to administer the collection and distribution of the new goods and services tax. According to her, it is this point that has blocked attempts at reform in the past. The entity would have equal participation from the Union, states and municipalities. “So it’s a win-win. In my opinion, both the taxpayer would trust this entity and the states and municipalities, which will have an equal stake,” she said.

Deputy Newton Cardoso Jr. (MDB-MG) believes that splitting the VAT in two, one federal and the other managed by states and municipalities, could facilitate political approval of the reform.

Isaias Coelho, a researcher at FGV, said VAT will generate economic growth. “Foreign competition is not faced on the outside, it is faced on the inside. The Brazilian producer has to fight against the foreign product here in Brazil. There he has no tax residue in prison, there he leaves exempt from VAT. So we have to clean up here too. Leave the tax only at the last stage,” he said.

Property taxes
But the director of the Instituto Justiça Fiscal, Paulo Gil, proposed to first review income tax and property taxes. He said such a review would facilitate the reduction of consumption taxes. According to him, who is a tax inspector, there was a silent reform in the 1990s which reduced the incomes of businessmen and widened the consumption tax base.

“The biggest taxpayer in 2020 declared BRL 2.750 billion. And there was a rate close to 1% or 2%,” he said.

On the other hand, the rapporteur for the reform, MP Aguinaldo Ribeiro (PP-PB), said that the group should focus on the taxation of consumption. “I haven’t seen anyone defending the current system here. But sometimes they keep saying it’s not the time to deal with it… Don’t start this conversation, we’re past that point. We are focused and I am focused on the theme,” he said.

MP Zé Neto (PT-BA) said that parallel negotiations could be carried out to compensate some more resistant sectors with other measures. And he mentioned the payroll exemption, which is important for the service sector.

Report – Silvia Mugnatto
Editing – Roberto Seabra