Fear of electoral law hinders government economic measures

The government’s concern with the electoral law has hindered measures in the economic area at a time when they could help the popularity of President Jair Bolsonaro (PL) in the race for the Planalto Palace.

The measures were designed to give tax relief to individuals and companies, facilitate access to credit and even attract foreign capital to the country. With the uncertainties about possible violations of the legislation this year, the initiatives have been analyzed with more caution – and, as a consequence, part has already been discarded.

The main initiative blocked is the correction of the Individual Income Tax table, a promise made by Bolsonaro in the 2018 election campaign. the measure would be more restricted — and now, nothing should get off the ground.

According to members of the economic area, the expansion of the exemption range this year would create free access to only part of the population – which could violate the legislation. The measure could help Bolsonaro’s popularity as he appears in the second position in the polls, but is no longer mentioned by the government or as part of the “mini tax reform” currently being stitched together between the government and Congress.

The government even tried to correct the table with a bill sent last year to Congress with the aim of also altering other points of the Income Tax. But the project was the target of resistance on different fronts, especially from businessmen who feared an increase in the tax burden, and ended up being buried by parliamentarians.

The electoral law prohibits, in the year of the dispute, the “free distribution of goods, values ​​or benefits by the public administration”, except in extreme situations (such as calamity or emergency) or in cases of social programs authorized by law and which were already performed in the previous year.

Another measure that entered the analysis of a possible conflict with the electoral law is the exemption from income tax for foreign investments in Brazil. The proposal has been studied at least since February and was announced by Minister Paulo Guedes (Economy) in March, but has not yet come to fruition.

“We will be removing taxes on foreign investments in private bonds. We should announce this next week,” the minister told Sheet on March 1st. After two and a half months, the initiative has not yet been implemented due to caution about the electoral law.

The measure is defended by the economic team as a means of benefiting long-term private investments, but also of facilitating the entry of dollars into the country at a time when the exchange rate pressures inflation – which hinders Bolsonaro’s reelection plans.

Faced with the problem, the government began to rely on Congress to try to unlock at least part of the proposals. In the case of the Income Tax for foreigners, the solution found was for the measure to be included in a bill and receive approval from parliamentarians.

Even so, there would still be a need to analyze the electoral law in the act of sanction – since the act of the president could constitute a conflict with the legislation. In that case, the measure would have a chance of being effective if Congress overrides the president’s veto.

This is what happened when the government vetoed the debt renegotiation program for micro and small companies. Approved by Congress, the Relp (Program for Rescheduling Payment of Debts in the Scope of Simple Nacional) was barred by Bolsonaro with the official justification that the text was unconstitutional and contrary to the public interest by generating revenue waivers.

Government members, however, claim that the points raised officially could be circumvented and that the electoral law was the main concern for the presidential veto. Then Congress overrode the veto and the Relp went into effect – later being regulated by the IRS.

Different members of the government report that there was also a rigorous analysis regarding the possible conflict between the electoral law and the text on the Pronampe (National Support Program for Micro and Small Businesses) and PEC (created the to Credit), already approved by Congress. The text is already on the eve of the deadline for sanction (next Wednesday), but now reports are that Bolsonaro must give approval with only a few sanctions (unrelated to the electoral law).

The obstacle with the measures has been observed while government members report that the analyzes of the electoral law are without clear criteria, sometimes gaining a free pass and sometimes being barred.

Part of the government understands that the Income Tax for foreigners, for example, would not affect elections and would not generate votes for Bolsonaro. The legislation and the jurisprudence of the TSE (Superior Electoral Court) are also not seen as clear in the government.

In the economic team, the assessment is that the team tried to stop different initiatives of the political class throughout Bolsonaro’s term and that now the roles have been reversed – the portfolio tries to proceed with the measures and the Planalto Palace holds.