2023-12-04 15:19:34
Since the beginning of this year, the current federal administration has expressed its desire to implement the Tax Reform of taxes on consumption, aiming to modernize the Brazilian tax system, through simplification – of a system that is among the most complex in the world – and adaptation to best international practices. This topic was discussed by different legislatures, totaling more than thirty years of debates in Congress about what would be the best model and the most appropriate way to change the tax system.
After this long period of maturation, the National Congress, with the support of the Federal Government, prioritized this topic on the legislative agenda as one of the pillars of economic policy, in order to present a new scenario for investors – both national and international. Along these lines, this reform has always had as its guiding principle the rationalization of tax collection and the end of numerous uncertainties that currently generate lengthy disputes between the tax authorities and taxpayers, ultimately totaling the cost of doing business in the country at more than 1.7 trillion reais – annually –, a value much higher than the average for member countries of the OECD – Organization for Economic Cooperation and Development.
Like this, the Chamber of Deputies on June 7, 2023 approved the Tax Reform on consumption in two rounds, followed by the approval in the Senate on November 8, 2023and although much of the matter is already a consensus between the two legislative houses, there are still some points that must be analyzed by the Chamber of Deputies with a certain speed so that the reform can be completed in 2023, as the Federal Government intends.
Despite the historic milestone that the progress towards approval of the Tax Reform represents for the country, as it will represent the biggest tax change since the Federal Constitution of 1988, it is important to emphasize that the Constitutional Amendment Proposal (PEC) No. 45-A underwent numerous changes during its processing in the Federal Senate, where we draw attention mainly to the modification inserted in the Selective Tax, which now affects – also – the extraction of commodities regardless of their destination (domestic or foreign market) with a maximum rate of 1% of the market value of the product.
“This innovation brought by the legislator, instituting the Selective Tax on the extraction of commodities, including when destined for export, violates one of the main global precepts on taxation, the principle of destination, where taxation occurs only in the country where final consumption will occur. This principle is emphasized in international standards and sanctioned by the World Trade Organization – WTOan institution of which Brazil is a founding member country, and corroborated by OECD – Organization for Economic Co-operation and Development in countless studies.” points out Vinicius Cavalcanti, specialist in the energy, oil and gas sector and senior tax consultant.
Vinicius also mentions that this possible new incidence of the Selective Tax on oil, gas and their derivatives, in addition to minerals, also violates another precept of the Tax Reform, the maintenance of the global tax burden, since the innovation brought by the legislator will increase the tax burden in the country, in addition to creating insecurity for investors in such industries.
Second positioning of the Brazilian Institute of Oil and Gas – IBPthe incidence of the Selective Tax on the extraction of oil, gas and minerals will cause a new economic impact for these sectors, affecting the attraction of investments and the country’s industrial competitiveness, given that with the acceleration of the energy transition, there is less availability of capital for investments, making companies in the current scenario of global competition promote the allocation of their resources taking into account the country that has good fundamentals and greater legal security to guarantee the sustainability of investments.
“Although the Tax Reform is necessary and progresses well in several aspects, on the issue of the Selective Tax, the legislator, when establishing such a tax for goods and services harmful to health or the environment, escaped the concept of what the sin tax established in other countries, as the incidence is generally restricted to commercialization, that is, to the moment of consumption.” says Vinicius
The Selective Tax was inspired by the “Sin Tax” existing in the United States, which implies an individual’s ability to use or not use a certain item that is harmful to the environment or their health and if they wish to do so, they will be burdened with greater taxation. “However, in the case of the Selective Tax being instituted for the Oil & Gas industry, we have something totally contrary to this precept, since the current reality demonstrates – still – a global dependence on oil and its derivative products, with no way to individual opt for another economically viable solution in the short term.” ponders Vinicius
The text of the Tax Reform is currently being analyzed by the Chamber of Deputies, where the changes promoted by the Federal Senate will be discussed, including those referring to the Selective Tax and as soon as this work is completed, the final approval procedures in the Legislature will follow.
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