Does tax reform place the country among the most modern? Experts evaluate

Report from the portal UOL addressed the proposed regulation of tax reform, presented last week by the Minister of Finance, Fernando Haddad. The prof. Eduardo Maneira, founding partner of Maneira Advogados, was interviewed to comment on the matter.

Tax reform puts country among the most modern? Experts weigh in

Giuliana Saringer
From UOL, in São Paulo

(Image: Reproduction)

The Brazilian tax system will be one of the best in the world after the tax reform, according to the Minister of Finance, Fernando Haddad. The speech was made after the minister delivered the reform bill to Congress on Wednesday (24).

"People should be a little scared, it's 300 pages. But this replaces a series of laws. The latest World Bank report placed the country among the worst tax systems. The effort aims to place the country among the ten best tax systems in the world", said the minister.

Experts interviewed by UOLstate that the reform will improve Brazilian taxation, should reduce court cases involving taxes, but that it is difficult to say whether it will be among the top ten in the world. This depends on the final regulations and the day-to-day implementation of the system.

MOST MODERN SYSTEM

Brazil will no longer have one of the worst tax systems in the world. This is the vision of Eduardo Maneira, partner at Maneira Advogados and associate professor of tax law at UFRJ. For him, it is possible that the new system will become one of the best in the world, but it all depends on how it will be implemented and the regulations that still need to be made.

“This statement by Minister Haddad could come true depending on how they treat this complementary bill, because sometimes the details can be harmful.”
Eduardo Maneira, lawyer

The Brazilian reform was inspired by international VATs (Value Added Taxes). Alessandra Ribeiro, partner and director of macroeconomics and sectoral analysis at Tendências Consultoria, states that the advantage of “arriving late” is being able to build on what worked in other countries and bring it to the Brazilian reality. According to her, the country used some of the most modern VATs in the world as a basis, such as New Zealand's.

Central point of tax reform, CBS and IBS are part of VAT. Taxes will be managed, respectively, by the Union and by States, the Federal District and Municipalities. The selective tax, in turn, aims to discourage the consumption of products that are harmful to health and the environment.

With the reform, taxation will improve. However, it is difficult to say that it will be among the ten best in the world. One of the main advances will be to reduce the complexity of taxes and unify the rules in the states. “I don't know if it's possible to say that it will be among the top ten in the world, but I think that having a big improvement and becoming a good system is already a reason to celebrate and stay optimistic”, says Guilherme Tinoco, associate researcher at FGV Ibre.

Cashback is cited as an important innovation. The mechanism can benefit 73 million people from the poorest section of the population. Part of the refund will come automatically in bills such as electricity.

CURRENT SYSTEM IS CONSIDERED BAD

Current taxation is considered bad due to its complexity. Ribeiro states that the differences in tax rates and laws in the states cause confusion, increasing the number of tax cases in court.

IBS will replace the ICMS of the states and the ISS of the municipalities. CBS will unify federal taxes, which are PIS, Cofins and IPI. Today taxes are charged at source, which causes a “fiscal war” between states and municipalities.

Currently, taxes are charged at the place of origin of production. The text proposes that the tax be charged at the destination, that is, at the place where the good or service is consumed. With destination charging, proposed in the reform, this will put an end to the tax war between states. Today, localities are fighting among themselves, offering more attractive tax conditions to attract investment from companies.

Ribeiro states that Brazilian taxation is, on average, 34% today. With the new VAT, it will be around 26.5%, reducing the total tax. The high value is justified by the fact that the charge is currently cumulative, that is, taxes are charged on top of other taxes that have already been charged in the production chain of that good or service provision.

The tax system was designed in 1950 and is therefore outdated. Maneira states that, at the time, the economy was different, very based on goods, while today there are several advances in relation to electronic commerce, for example. The legislation did not keep up with the changes in practice in the economy.

"The rules are well directed, there is careful work, but we will have to see the implementation, whether it will really work as expected. If it looks good on paper and in implementation and the economic agents have difficulty, then we will not go to the best in the world."
Alessandra Ribeiro, partner at Tendências Consultoria

REFORM IS NOT YET WORTHY

Congress needs to evaluate the complementary bill sent by Haddad. The president of the Chamber of Deputies, Arthur Lira, said that the topics will be analyzed by working groups made up of five or six parliamentarians.

Haddad sent the first of two texts to Congress. It institutes the general law on IBS (Tax on Goods and Services), CBS (Social Contribution on Goods and Services) and IS (Selective Tax). It also talks about most of the rules that regulate the reform. The second project must be sent in the first half of May and will deal with the activities of the IBS Management Committee and the distribution of IBS revenues among the federative entities.

https://economia.uol.com.br/noticias/redacao/2024/04/28/reforma-tributaria-modernidade-do-sistema.htm