Broad Tax Reform Could Lead to Cuts, Says Brazilian Economy Minister

RIO DE JANEIRO, BRAZIL – Economy Minister Paulo Guedes said yesterday, July 29th, that with a broad taxation base – with more people and companies paying taxes – reducing and even extinguishing taxes is feasible. Guedes was in a meeting with the tax reform rapporteur in Congress yesterday, Deputy Aguinaldo Ribeiro, to discuss the text submitted by the government.

The Secretary of the Presidency of the Republic, Luiz Eduardo Ramos, and the Special Secretary of the Federal Treasury, José Tostes, also attended the meeting at the Planalto Palace.

According to Guedes, the reform will lead to a redistribution of the tax burden, broadening its base, and this way it will be possible to eliminate and even reduce taxes, such as the Tax on Industrialized Products (IPI). If there is a new wide base, several taxes could be abolished, such as taxes on household appliances like stoves, refrigerators and washing machines, in addition to increasing the income tax exemption threshold.

“A lot can be done if we achieve a broad base that taxes those who were not paying before and allows those who were paying to be less taxed. When everyone pays, everyone pays less,” Guedes said after the meeting, alongside Ribeiro. According to Guedes, the meeting proved that there is a “convergence of principles” between the government and Congress to reform taxes.

Aguinaldo Ribeiro said those principles are tax simplification, transparency, tax justice, with a redistribution of the tax burden with no increase in the volume of taxes paid by taxpayers. “This is crucial for us, to have a reform that will positively impact our country. We all want to have a system that improves the business environment, the confidence in our country, that provides legal security, stability, and that this will generate an impact on our GDP.”

Guedes stressed that the government will not increase the tax burden. “We will not raise taxes. It’s a redistribution of the burden,” he said.

The Minister has been advocating the creation of a tax on electronic payments to offset reductions in payroll taxes.

“We can reduce the income tax, eliminate some IPIs. We can even reduce five, six, seven, eight, ten taxes if there is a broad base where new levies are raised for people who don’t now pay, like digital payments. There is a new digital economy emerging,” he said.

Guedes added that submitting reforms such as the tax and administrative reforms to Congress does not depend on the economic team. “It is politics that sets the pace of reforms, not the economic team,” he said.

The Minister of Economy reiterated that the administrative reform is ready, waiting for the opportune moment to be submitted to Congress.

Source: Agência Brasil

For the full picture, see our Brazil Tax Reform: Complete Guide.