Nine parties oppose Brazil’s tax reform: “Government wants to fatten public coffers”

RIO DE JANEIRO, BRAZIL – The leaders of nine parties (PSL, MDB, Solidariedade, Cidadania, DEM, Novo, Podemos, PSDB and PV) on Thursday, July 8, released a statement opposing the Income Tax reform submitted by Economy Minister Paulo Guedes to Congress last month.

According to the parties, the bill will raise taxes for families and companies.

“We decided to publicly oppose the government’s income tax reform bill. Brazil’s productive sectors and working class cannot bear a bill that increases the tax burden, penalizes investments, and hinders the generation of jobs and income. It is necessary to vigorously denounce that the current government’s only goal in its anti-reform is to fatten public coffers,” the chairmen of these parties write.

Entrepreneurs urged Congress to first analyze the administrative reform, which proposes to reshape the State’s Human Resources, with new rules for hiring, promoting and dismissing government employees.

Guedes met today with “heavyweight” GDP entrepreneurs and vowed to rebalance corporate income tax rates so that the reform will not increase the tax burden. However, he said he would not abandon the taxation on the distribution of profits and dividends.

In the letter, the party chairmen say they recognize distortions in the Income Tax and the need for reorganization, but not “on the fly” under pressure from the Executive.

“They endanger the survival of small and medium-sized companies and cause instability in larger ones. The only certainty is that all of this will result in the overall negative performance of the economy. The most affected will be the 14.7 million Brazilians who are looking for work and, obviously, lower income families,” the parties say.

Guedes has been saying that he will work on the bill and Chamber president Arthur Lira (Progresistas-AL), who once wanted to vote on the bill before recess, now says he will not set the agenda while the draft is not “mature.”

The reform’s rapporteur, deputy Celso Sabino (PSDB-PA), does not see the protest with concern. “We are on the same side. Because we are not going to let [taxes] be increased in the report. We are working to lower it, in fact,” he said.

One of the letter’s signatories is MDB chairman, deputy Baleia Rossi (SP), author of the Proposed Amendment to the Constitution (PEC) 45, which, until the presidency of Rodrigo Maia (DEM-RJ) in the Chamber, was considered one of the main tax reform bills.

With the election of the new leadership of Congress, however, the group created to converge the tax reform bills was disbanded and opted for dividing the bill.

The reform of the income tax is the second phase of the reform delivered by the government to Congress. Previously, the economic team had submitted the creation of the Contribution on Goods and Services (CBS), a proposal to merge the current PIS/Cofins (federal taxes based on the turnover of companies).

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