The article discusses the tax reform being analyzed in the Chamber of Deputies in Brazil. It highlights that the extinction of five consumption taxes will be completed in 2033. These taxes include the IPI, PIS, Cofins, ICMS (state), and ISS (municipal) that the taxpayer currently pays but is not fully aware of the amount. The article explains that these taxes are integrated into the prices of goods and services throughout the production chain and are not highlighted on the invoice. The new tax reform aims to simplify the tax system and make long-chain products cheaper by providing tax credits and eliminating hidden taxes.
To avoid price increases for short-chain goods and services, the report by deputy Aguinaldo Ribeiro foresees reduced rates and even zero rates for health services, basic basket items, and medicines. Additionally, a cashback mechanism is proposed. The current system applies tax based on where the service or good is produced, leading to tax wars between states as they compete to attract factories by reducing the ICMS rates. However, the new system will transfer the taxation to the place of consumption. A fund with resources from the Union will be created to guarantee benefits already granted by 2032, as provided by Complementary Law 160/17.
The article mentions that the constitutional reform of the tax reform is expected to be promulgated this year, with complementary laws to follow in the next year. The transition will start in 2026 with a CBS (Goods and Services Tax) of only 1% to test the system. In 2027, CBS will go into full effect, and the transition for the IBS (Tax on Goods and Services) will take place between 2029 and 2032. The distribution of the new tax collection between the Union, states, and municipalities will undergo a 50-year transition (2029-2078) to correct the losses of states and municipalities resulting from the collection of taxes at the place of production.
Summary:
Title: The Future of Tax Reform in Brazil: Simplification and Reduced Rates
Introduction:
– The current tax system in Brazil is complex and involves multiple consumption taxes that are integrated into the prices of goods and services.
– The proposed tax reform aims to simplify the system and provide tax credits, making long-chain products cheaper.
– Reduced rates and even zero rates are proposed for various essential items and services, along with a cashback mechanism.
– The current system leads to tax wars between states, but the new system will transfer taxation to the place of consumption.
– A fund will be created to guarantee benefits already granted, and a transition period will be implemented to distribute tax collection among different entities.
The Challenges of the Current Tax System:
– The current tax system in Brazil involves five consumption taxes: IPI, PIS, Cofins, ICMS, and ISS.
– These taxes are charged throughout the production chain and are not highlighted on the invoice, leading to a lack of transparency for taxpayers.
– It is challenging for taxpayers to know the exact amount of tax they are paying for a specific product or service.
– The taxes are integrated into the prices of goods and services, resulting in hidden taxes.
The Promises of the Proposed Tax Reform:
– The proposed tax reform aims to simplify the current tax system and provide tax credits.
– Long-chain products like cars are expected to become cheaper due to the new tax credits.
– Reduced and even zero rates are proposed for health services, basic basket items, and medicines.
– A cashback mechanism is introduced to provide additional benefits to taxpayers.
Transition and Implementation:
– The constitutional reform of the tax reform is expected to be promulgated this year.
– Complementary laws will be implemented in the following year to ensure a smooth transition.
– The transition will start with a CBS of only 1% in 2026 to test the new system.
– The CBS will go into full effect in 2027, and the transition for the IBS will be between 2029 and 2032.
– A 50-year transition period (2029-2078) will be implemented to distribute the new tax collection among the Union, states, and municipalities.
Conclusion:
– The tax reform being analyzed in the Chamber of Deputies in Brazil aims to simplify the current tax system and provide tax credits.
– Reduced rates and even zero rates are proposed for essential items and services.
– The transition period will ensure a smooth distribution of tax collection among different entities.
– The proposed tax reform is expected to bring transparency, efficiency, and economic growth.
Additional Piece:
Title: The Benefits and Challenges of Tax Reform in Brazil: A Closer Look
Introduction:
– The tax reform being analyzed in the Chamber of Deputies in Brazil promises significant changes to the current tax system.
– While the reform aims to simplify the system and provide benefits to taxpayers, it also presents challenges and potential risks.
– In this additional piece, we will delve deeper into the benefits and challenges of the proposed tax reform and explore its implications.
Benefits of Tax Reform:
1. Simplification and Transparency:
– The current tax system in Brazil is complex and lacks transparency. The proposed tax reform aims to simplify the system and make tax payments more transparent.
– By consolidating multiple consumption taxes into a unified tax system, taxpayers will have a clearer understanding of the taxes they are paying.
2. Reduced Burden on Taxpayers:
– The introduction of tax credits and reduced rates for various items and services will lead to a reduced tax burden for many taxpayers.
– Essential items like health services, basic basket goods, and medicines will be subject to zero or reduced rates, making them more affordable for the general population.
3. Economic Growth:
– The new tax system is expected to stimulate economic growth by making long-chain products like cars cheaper.
– With tax credits available, businesses will have more incentives to invest and expand, leading to job creation and increased economic activity.
Challenges and Risks of Tax Reform:
1. Implementation and Transition Period:
– The implementation of the tax reform and the transition period can be complex and time-consuming.
– Proper planning and coordination among different entities will be crucial to ensure a smooth transition and avoid disruptions to businesses and taxpayers.
2. Distribution of Tax Collection:
– The 50-year transition period for the distribution of tax collection among the Union, states, and municipalities presents a challenge.
– Ensuring a fair and balanced distribution of tax revenue may require careful consideration and adjustments to avoid sudden losses for certain entities.
3. Potential Resistance and Opposition:
– Any significant reform is likely to face resistance and opposition from various stakeholders.
– The proposed tax reform may encounter opposition from businesses and individuals who benefit from the current system or have concerns about the potential impact on their operations.
Conclusion:
– The tax reform being analyzed in the Chamber of Deputies in Brazil holds the potential to simplify the tax system, reduce the tax burden for taxpayers, and stimulate economic growth.
– However, its successful implementation will require careful planning, coordination, and addressing the challenges and potential risks associated with the reform.
– By addressing these challenges and promoting transparency and fairness, Brazil can create a tax system that supports economic growth and benefits its citizens.
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The extinction of the five consumption taxes provided for in the tax reform being analyzed in the Chamber of Deputies (PEC 45/19) will be completed in 2033. Goods and Services (CBS), which will be administered by the Union; and the Tax on Goods and Services (IBS), which will be administered by states and municipalities. The two will have the same rules, only that what changes is the management.
In 2033, therefore, the IPI, the PIS, the Cofins, the ICMS (state) and the ISS (municipal) that the taxpayer pays today, but does not even know how much, will leave the scene. They are integrated into the prices and are not highlighted on the invoice because they are charged throughout the production chain of a good or service. And it is that, most of the time, it is not possible to deduct what was already paid in taxes in the previous phase because there is no such provision.
New taxes promise this credit, making long-chain products like cars cheaper. This is how the rapporteur of the reform, deputy Aguinaldo Ribeiro (PP-PB), explains it: “It is difficult in Brazil to say how much tax is paid on a certain product or service due to tax residuals. They are what we pay in taxes, they are embedded in everything we buy, but we don’t credit that.”
To avoid price increases for short-chain goods and services, Report by Aguinaldo Ribeiro foresees reduced rates and even zero for various items such as health services, basic basket and medicines, in addition to a cashback mechanism.
End of the tax war
In the current system, the tax is applied where the service or good is produced. The new system transfers this taxation to the place of consumption. Due to the current system, states waged tax wars; that is, they reduced the ICMS rates to attract factories.
Complementary Law 160/17 provided for the end of these benefits by 2032. To make this mandate compatible with the reform, the rapporteur’s proposal creates a fund, with resources from the Union, to guarantee the benefits already granted. In total, R$ 160 billion will be invested between 2025 and 2032.
CONTINUE AFTER ADVERTISING
The expectation is that the constitutional reform of the tax reform will be promulgated this year, but the complementary laws should be left for next year. In this case, the transition would start in 2026 with a CBS of only 1% to test the system. This is because it will be necessary to calibrate the rates of the new taxes so as not to increase the tax burden.
In 2027, CBS goes into full effect and the IBS transition will be between 2029 and 2032.
50 year transition
There is a 50-year transition (2029-2078) for the distribution of the new tax collection between the Union, states and municipalities. “This transition is only internal, federative. It will not affect the citizen. It only affects the federative entities”, explains the speaker.
This transition is necessary to correct the losses of the states and municipalities that had a more accentuated collection due to the collection of taxes in the place of production of goods and services.
A part of the general collection will be retained and redistributed to avoid sudden losses. The promise, however, is of gains from the economic growth that should come from the changes.
Related
Novo sistema tributário será implantado gradualmente até 2033
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