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Estadão publishes an article by Eduardo Lourenço that deals with the impact of tax reform on public policies
The Estadão website published an article written by Dr. Eduardo Lourenço that deals with the impact of tax reform on public policies, with emphasis on the case of the Mais Leite Saudável Program, which guarantees dairy industries to act as inducing agents in the achievement of social rights.
Tax reform and public policies: Mais Leite Saudável Program
March 15, 2022 | 10:10 am
Eduardo Lourenço Gregório Júnior, PhD and Master in Constitutional Law (UniCEUB). LLM in Tax Law from IBMEC/DF. Partner at Maneira Advogados.
(E-mail: eduardo.lourenco@maneira.adv.br)
Everyone is following discussions about the long-awaited tax reform. However, which tax reform? Change the tax system making it less regressive? Increase revenue? Unify taxes? Adjust income tax? We have already had the opportunity to analyze several proposals, from many aspects, including historical[1]. What we intend now is to bring another vision, quickly highlighting the indispensable attention to existing public policies, especially those that rely on the almost isolated action of the private sector through tax adjustment instruments.
This is the case of the Programa Mais Leite Saudável – PMLS, which – with Constitutional support (among others, articles 6 and 186) – guarantees the dairy industries to act as inducing agents in the achievement of social rights, serving rural producers who are part of the respective production chain. Provided for in Law No. 10,925/04, the PLMS was regulated by Decree No. 8,533/15, which standardized the administrative process for project approval, as well as other requirements for the adequate strengthening of public policy.
Must be submitted, supervised and inspected by the Ministry of Agriculture, Livestock and Supply, industry projects in the PMLS must, “to assist rural milk producers in developing the quality and productivity of their activity”, guarantee the “supply of technical assistance focused primarily on property management, implementation of good agricultural practices and training of rural producers; creation or development of activities that promote the genetic improvement of dairy herds; and development of specific programs to promote health education in livestock.” (article 15 of the aforementioned decree).
These activities, without a shadow of a doubt, encompass social rights situations. The projects created and maintained by the milk industries meet the rights expressly provided for in article 6 of the Federal Constitution, notably education, health and food. In fact, project structures have the ability to help not only producers (direct impact of the social program), but also society as a whole (indirectly, as it allows, in addition to social development, an increase in the production of basic foods).
Obviously there is a state counterpart, especially because it has the responsibility to guarantee the fulfillment of social rights, including through public policies. It is in such a way that the law guarantees the industry the enjoyment of presumed PIS and Cofins credit when purchasing milk from an individual rural producer if “investments are made to assist rural milk producers in developing the quality and productivity of their activity”(section III, §3, article 9-A, of Law No. 10,925/04).
A quick aside: even though we have the credit presumed to be a tax benefit from a legal perspective, practice and facts demonstrate the opposite. The industry purchasing rural production from the individual rural producer is entitled to a presumed credit calculated on the tax rate that would be levied on the operation (in this case, PIS/Cofins), but which was not charged because it involved the individual rural producer. However, this does not eliminate taxation of the inputs used by the producer, which is why presumed credit is stipulated so that there is no cumulative taxation (of contributions that are, in the situation, non-cumulative), pursuing neutrality in the operation. In fact, this presumed credit is never stipulated at the same percentage as if there were taxation and calculation of the credits.
Therefore, it seems clear to us that there is, through tax law, the achievement of social rights by the milk industries. And, in the end, the one who wins most is society itself, which ends up receiving better products. Producers also receive a lot in social advances.
To give you an idea, the Ministry of Agriculture, Livestock and Supply provides the data and effects of the PMLS, concluding that “[i]n five years of existence, the PMLS has already allowed almost 75 thousand families of milk producers to benefit from projects, including technical assistance, which has resulted in improvements in the productivity and quality of milk, as well as in the producer’s profitability”[2].
In other words, the Mais Leite Saudável Program has already reached almost 80 thousand dairy farming families. We are talking about hundreds of thousands of people who are having the opportunity to better develop their activities, especially in a universe in which the vast majority of people have limited access to education (due to the massification of production units, especially when it comes to dairy farming[3]).
Furthermore, attention must be paid to the fact that milk production occurs practically throughout the national territory. According to IBGE, in only 57 municipalities there is no record of the activity, which leads us to verify that the Mais Leite Saudável Program has the capacity to reach almost all national municipalities (and, consequently, milk producers). Analyzing data from the 2017 Agricultural Census, it appears that the majority of the 1.17 million dairy producers are small, with daily volumes of up to 200 liters. These correspond to 92% of total establishments, representing 44% of production.
What is meant by this is that the milk industries function, through a tax instrument, as providers of social rights for those who need it: the small milk producer. This is the one who receives access to the program that gives him greater technical capacity and, in this way, is able to better carry out his activity and prosper in life, in addition to providing a better product for the entire Brazilian society.
Having verified the simplicity of the system that allows the guarantee of social rights through public policies implemented by private companies with tax incentives, we must ask: what could tax reform change?
The answer is simple and must take into account the fact that the PMLS exists as a counterpart to trying to achieve neutrality of taxation with the use of a legal-tax instrument (presumed credit). If this tool no longer exists, or even its existence is prohibited (as PEC 45/2019 intends), the fact is that it will be the end of the PMLS.
This is because the main tax reform proposals, especially PEC 110/2019 and PEC 45/2019, intend to create a tax system where everyone is a taxpayer and there would be full non-cumulative, with the impossibility of granting tax benefits as a rule. The issue is that, in milk production, as seen, almost all rural producers are small, with a low level of education and with little access to information, especially in relation to taxation.
In such a way, considering a complete and computerized system, these producers would not be able to completely implement non-cumulative activity and guarantee, without problems with inspection, suppliers and purchasers, compliance with additional obligations, declarations, issuance and payment of invoices. Studies carried out by the CNA economic nucleus demonstrate the impossibility of implementing the new system in the countryside without increasing the tax burden.
That is, in one fell swoop we would have the end of the PMLS and an increase in the tax burden.
On the other hand, it is true that the latest report made available in PEC 110/2019, under the rapporteur of Senator Roberto Rocha, foresees the possibility of the Complementary Law establishing a Special Regime for several sectors, without mentioning, in the text of the PEC, what they would be. The Special Regime could, for example, change tax rates (they would be uniform as a rule) and define crediting rules. It is a fact that this PEC 110 proposal evolves at this point in relation to PEC 45.
However, we understand that developments are still timid and do not guarantee due legal certainty: the ideal would be for the text of the PEC to provide that the Complementary Law should grant adequate and favorable tax treatment to the agricultural situation (covering all phases of production, especially in relation to food). In other words, it would no longer be a possibility but, alongside other constitutional dictates, it would be an imperative command.
It is undeniable that the agricultural sector is extremely important for the national economy and the history of Brazil, so much so that it is listed as an effective and participatory player in the definition and execution of public policies (art. 186 of the Constitution). Therefore, as taxation is one of the ways to implement public policies, social rights and, also, due to the uniqueness of the Constitution, it is essential to give voice (and listen) to the agricultural sector when any change that impacts the activity, the product, the producers is being discussed... And, in this sense, without a shadow of a doubt, the PMLS must not only be maintained in its entirety, but encouraged and increased.
It is better to cut corners by placing investments directly where they are needed and useful, or, as they say, “on the factory floor”.
Notes
[1] WAY, E.; LOURENÇO G. JR, E. The limits of tax reform for agribusiness: export immunity as a guarantee of national development In: Tax reform IPEA/OAB/DF.1 ed.Brasília: IPEA, 2018, v.1, p. 109-128; LOURENÇO G. JR, E. Tax Reform: Risks for Agribusiness In: Agribusiness, Taxation and International Issues.1 ed.São Paulo: Quartier Latin, 2021, v.1, p. 351-362.
[2] Check out: https://www.gov.br/agricultura/pt-br/assuntos/producao-animal/programa-leite-saudavel
[3] According to data from the last Agricultural Census, Brazil has 5,073,324 agricultural establishments. Of these, only 5,840 are large producers. There are 5,067,484 small and medium-sized producers, that is, more than 99% are small and medium-sized rural producers, which are within the scope of PRONAF and PRONAMP[1], which directly influences schooling, according to the Census' own conclusions: “Of the total number of agricultural producers, 15% declared that they never attended school; 14% attended up to the literacy level, and 43%, at most, elementary level. Thus, we can see that 73% of all producers have, at most, primary education (formerly primary) by level of education. read and write.” 2017 Agricultural Census – Definitive Results.
Document: HTT PS://BIBLIOTECA.IBGE.GOV.BR/VISUALIZACAO/PERIODICOS/3096/AGRO_2017_RESULTADOS_DEFINITIVOS.PDF PDF
, p. 68, accessed on 08/13/2020.
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