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Locked in the National Congress for months, the tax reform regained space in the news after the presidents of the Chamber of Deputies, Arthur Lira (PP), and of the Senate, Rodrigo Pacheco (PSD) reached an agreement to resume discussions on the proposal. .
The news could have a positive effect on the market, if it weren’t for one detail: the congressmen signaled that they want to vote only on the most popular points of the reform, that is, the correction of the Individual Income Tax (IRPF) table and the taxation of profits and dividends.
The vote will be based on a text already approved in the Chamber in September of last year, which provided for the correction of the IR table, the expansion of the exemption range from up to R$ 1,900 to R$ 2,500 and the reinstatement of the tax on profits and dividends. at a rate of 15%.
Far from touching on the most problematic points of Brazilian tax legislation, the proposals that should be discussed in Congress later this year sound electoral.
Changes in the IR table are necessary, but expanding the exemption range during a time when the Union is struggling to reduce the deficit in public accounts is risky and can contribute to a reduction in collection in the short term.
The proposal dealing with the taxation of profits and dividends is even more complex and controversial. For a long time, certain sectors of Brazilian politics have repeated the false information that companies are not taxed in Brazil, inciting the people to clamor for the creation of a tax on profits and dividends.
However, Brazil is one of the countries that most tax companies operating in its territory, in addition to having an unpredictable, complex and unattractive business environment.
Companies operating in Brazil are subject to Corporate Income Tax (IRPJ), at a rate of 25%, and Social Contribution on Net Income (CSLL), at a rate of 9%, totaling 34% in taxes levied. at source. In the case of banks, only the CSLL reaches 21%.
For comparison purposes, the global average corporate tax rate is 20%, according to data from the OECD (Organization for Economic Co-operation and Development). Developed countries with economies much stronger than Brazil’s, such as the United Kingdom (19%) and the United States (25%), tax their companies less than Brazil.
Furthermore, the proposals under discussion do not address one of the most important changes that the Brazilian tax system needs to undergo: the unification of taxes on consumption of goods and services.
In addition to at least 34% of taxes levied directly from companies, Brazilian consumers also pay several other federal, state and municipal taxes that are levied on products and services sold in the country.
Therefore, I believe that the discussion that must be resumed by Congress does not solve any of the glaring problems of the Brazilian tax system, nor does it contribute to an improvement in the domestic business environment.
If the proposal for taxation of profits and dividends gains strength, the Brazilian stock exchange should react with pessimism, since the present moment is already quite difficult for investments in variable income, given the high degree of uncertainty offered by the markets and the high level of the Selic — the basic interest rate.
Read on ‘Investigando o Mercado’ (exclusive to UOL Investimentos subscribers): information about the results of the car rental company Movida for the first quarter of 2022.
Levante’s Chief Strategist and Founding Partner
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