Irregular extension of the payroll exemption can generate alert in Bolsonaro’s accounts

The technical area of ​​the TCU (Tribunal de Contas da União) recommended issuing an alert to President Jair Bolsonaro (PL) due to the irregular sanction of the law that extended the exemption from payroll, a tax benefit granted to companies in 17 sectors.

The law was published on the night of December 31, 2021 without the government having adopted the appropriate measures to compensate for the loss of revenue, as required by the LRF (Fiscal Responsibility Law) and the Constitution itself.

“The non-observance, on the part of the Executive Power, of constitutional and legal requirements for the creation or extension of tax waivers during the 2021 fiscal year was evident”, says the opinion of the TCU’s technical area, obtained by the Sheet.

Another 12 rules dealing with tax benefits, including laws and ordinances, were also implemented without due compliance with the requirements of the LRF, the LDO (Budget Directive Law) or the Constitution, according to the auditors’ diagnosis.

“It is necessary to consider the recurrence of the findings now reported in multiple external control actions, as well as in other Previous Opinions on the Accounts of the President of the Republic, in the case referring to 2016, 2017, 2018 and 2019”, says the document. “In this sense, it is necessary to record the repetition of irregularities and, therefore, issue a new alert.”

The final decision rests with the plenary of the TCU, which judges this Wednesday (29) the accounts of the Presidency of the Republic for 2021. The rapporteur is Minister Aroldo Cedraz. The tendency is for alerts to generate an approval of the accounts with reservations.

The payroll exemption would end in 2021, but the measure was extended until 2023 after approval of a bill to that effect by the National Congress.

Bolsonaro sanctioned the text at the end of 2021, ignoring the Ministry of Economy’s warnings about the need to compensate for the loss of revenue, since the impact of the measure was not included in the approved Budget for 2022.

According to government calculations, the extension of the policy generates a waiver of BRL 8.64 billion in 2022.

The recommendation of the portfolio headed by Paulo Guedes was to keep the IOF (Tax on Financial Operations) surcharge on credit operations and the CSLL (Social Contribution on Net Income) higher on banks. Without this, the technical position was that the exemption should be vetoed.

The president, however, did not want to leave the digital in the maintenance of surcharges.

On January 1, the General Secretariat of the Presidency of the Republic stated that the compensation would not be necessary because “it is an extension of an already existing tax benefit”.

In 2010, however, the TCU itself ordered the then Ministry of Finance —today the Economy— to “observe, when extending revenue waivers, the conditions established in article 14 of the Fiscal Responsibility Law”. In the court of accounts, this position is considered pacified, contrary to the government’s thesis.

In the technical opinion that subsidizes the account rapporteur, the auditors show that the General Secretariat of the Presidency of the Republic reiterated the understanding that “a simple extension does not attract the incidence of the fiscal responsibility rules established by the LRF or the LDO”.

The government agency also claimed to have backed up a decision by the Federal Supreme Court (STF) that distinguishes the institution of a benefit for the first time from the act of its extension.

“It is important to note that, within the scope of its inspection work, the TCU has positioned itself in the sense that the constitutional and legal constraints (…) for the granting of tax benefits must also be applied in the case of extensions of these waivers”, countered the technical area of ​​the TCU.

The auditors also mention that article 14 of the LRF itself, which deals with tax measures, brings the term “expansion” in relation to incentives or benefits of this nature when listing the need for compensation. In the interpretation of the TCU, the expansion would be both in quantitative terms (number of beneficiaries, values) and temporal (ie, extension of the waiver in time).

“Given all the above and considering the consolidated case law of the TCU on the application of the legislation on the subject, it is concluded that the considerations of the General Secretariat of the Presidency of the Republic regarding the extension of the benefit of exemption from the payroll, provided for in the Law 14.288/2021, were not enough to rule out the finding of non-compliance with the legal precepts required for granting the tax waiver in question”, said the technical area.

The sectors affected by the exemption are footwear, call center, communication, apparel and clothing, civil construction, construction companies and infrastructure works, leather, vehicle and body manufacturing, machinery and equipment, animal protein, textiles, information technology , communication technology, integrated circuits design, passenger subway-rail transport, collective road transport and road freight transport.