VP Mourão Advocates Tax on Payments to Finance Permanent Minimum Income Program

RIO DE JANEIRO, BRAZIL – On Friday, July 17th, Vice-President Hamilton Mourão advocated the creation of a tax on payments (which would be applied mainly to e-commerce) to replace the taxation collected by companies when paying salaries, provided it has a clear goal, such as financing the new ‘Bolsa Família’ (Family Grant), a program that the Jair Bolsonaro government intends to redesign under the ‘Renda Brasil’ (Brazil Income) label.

The new CPMF, as the tax to be recreated has been called, is the target of disagreement between Minister Paulo Guedes and the Chamber President, Rodrigo Maia who in an interview on Thursday, July 16th, said he intended to recreate the campaign “Xô, CPMF” (Shoo, CPMF), launched in 2007 against the Provisional Contribution on Financial Transactions, overturned at that time by Congress.

Guedes advocates the new tax as a means to relieve the payroll of up to one minimum wage (today, equivalent to R$1,045), which can be achieved through an emergency employment program of up to two years duration. In addition, a “negative” tax for casual workers is planned, taking the form of a 20 percent bonus on the worker’s monthly income (to be used for retirement).

“Minister Paulo Guedes considers it a substitute for the payroll taxes. By relieving the payroll, there would be a much greater opportunity for the creation of formal jobs. I am looking further ahead: a tax of this nature can also be used to reinforce the minimum income program, Renda Brasil, which is being set up by the government,” Mourão said in an interview.

The Vice-President said it is necessary to enlighten society that the intention is not only “to create a tax for the sake of creating a tax”.

“Today the discussion is centered on payroll relief, so I think it’s fair. It would not cover all kinds of transactions. Today we have a range of electronic transactions that are carried out and that pay no tax at all. We have to find a way to tax that. Let’s remember that our current tax system records an evasion/withholding of over R$400 billion. That’s a lot of money,” said the Vice-President.

Aware of the reaction the tax has created in Congress, the government has made political calculations and thought about alternatives, according to sources.

Amid the two proposals for reform created by legislators, one proposal would be to incorporate the concept of the new tax in another package.

If the government feels that the debate could be blocked, it could allow the new tax to be incorporated into the so-called ‘Carteira de Trabalho Verde e Amarela’ (green and yellow worker’s record book) program (scheduled for the next few months). As a result, the plan would not be evaluated from the perspective of tax reform, but instead a program against mass unemployment.

Another alternative is to seek support from the Senate. The employment program to be created by Guedes provides for fewer labor rules in relation to the existing CLT (Consolidated Labor Code) framework, at least for lower wage brackets.

“The discussion is held in Congress. I have drawn a comparison with the Amazon, comparing it to the Solimões-Amazonas basin. Congress is the great Solimões-Amazonas where all tributaries, that is, all opinions flow. So, it must be discussed there. If Congress accepts it, it means that Brazilian society accepts it. If it doesn’t, too bad,” Mourão said.