GLOBO listens to Eduardo Maneira about the government's proposal to tax dividends

Newspaper report O Globo interviewed Dr. Eduardo Maneira, president of the OAB Tax Law Commission, who gave his opinion on the government's proposal for taxation of dividends.

Doctors and lawyers pressure Congress against Income Tax reform

Representatives of liberal categories and sectoral entities intensify lobbying to change dividend taxation provided for in the rapporteur's opinion

Eliane Oliveira

7/21/2021

Liberal professionals push against Income Tax reform Photo: Reproduction

BRASILIA — Income Tax Collection on profits and dividends for all companies from 2022 made categories of independent professionals and other organized segments of the economy take a stand against the tax reform forwarded by the Executive to the National Congress.

The categories have pressured the proposal's rapporteur, deputy Celso Sabino (PSDB-PA), against the change. According to the proposal in the rapporteur's text, dividends and profits, when distributed, would be taxed at a rate of 20% at source, exclusively and definitively, that is, without compensation.

There will be an exemption for up to R$20,000 per month, but as long as the individual receives it from a micro or small company.

Among the professional categories that want to be excluded from the new taxation are doctors. The Federal Council of Medicine (CFM) asked in a letter sent to the Minister of Economy, Paulo Guedes, for the professionals to be removed from the proposal.

According to the entity's president, Mauro Ribeiro, taxation would have a negative impact on the profession, “already so weakened and strained in the fair and necessary fight against the pandemic”.

‘Cash settlement’

He defended the exclusion of doctors from taxation and stated that “any additional burden of taxation on dividends would place the tax burden on medical professionals at levels very close to confiscation.”

The president of the National Confederation of Services (CNS), Luigi Nese said that the reform is a “government cash grab”:

— The text gives a R$20,000 discount to each member and puts an end to the family partnership. If I have my wife as a partner, I can only use 20 thousand reais. This will put an end to companies — said Nese, adding that the proposal will seriously affect the lower middle class.

For the Brazilian Bar Association (OAB), the project especially harms typical middle-class professions. The entity states that the taxation of dividends, as proposed, will result in double taxation of profits earned by law firms, and will be a strong disincentive to the professional association.

— It would be important to highlight that the claim is not just for lawyers, but for independent professionals in general. The IR reform proposal brings an increase in the tax burden and complexity to the system — stated the president of the OAB Special Taxation Commission, Eduardo Maneira.

Taxation on profit

Celso Sabino has received demands from various sectors. But he argues that the application of taxes on profits and dividends is carried out by practically all countries and, in the specific case of Brazil, the taxation will be offset by a “bold” reduction in the corporate income tax rate, which due to the reform will fall from 25% to 12.5%.

— This path to taxing profits and dividends is a global bias. We are making a very bold reduction in the corporate income tax rate. We believe that, as a result, all sectors will benefit. This is the path and we are making the calibrations — said the rapporteur.

Mário Sérgio Telles, Economic Policy manager at the National Confederation of Industry (CNI), said that the entity is in favor of the combination of taxing profits in the company and part of the profits distributed among partners. The problem is the tax rates.

The CNI defends a 20% tax rate on profits (Corporate Income Tax + Social Contribution on Net Profit), currently 34% and which would fall to 21% in the rapporteur's proposal. The taxation of profits and dividends should be 15%, not 20%, as stated in the text.

— Taxation needs to be balanced, so that the company uses profits to reinvest in the business — said Telles.

Effect on banks

Febraban defends tax reform as it considers that only by changing taxes will it be possible to reduce the complexity and operational costs of companies.

In a note, the entity highlighted that the banking sector will continue to bear the highest burden of corporate taxation compared to other sectors of the economy, but considered that the rapporteur's replacement represents an improvement in relation to the original text, from the Executive.

“With lower taxation on companies, reducing corporate tax from 25% to 12.5%, an important incentive is created for them to expand their investments, with gains in productivity and efficiency, economic growth and greater job creation.”

The note also says that “from the point of view of the banking sector, we also hope that there will be greater convergence of our rate with that of sectors that carry out the same activities, so that we have, in addition to international alignment, equality between players in the same sectors”.

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