Opinion – Samuel Pessôa: Does Guedes leave a cursed inheritance?

Is the annual budget bill (Ploa) for 2023 that Paulo Guedes sent to the National Congress unenforceable?

No, the project is feasible. What is not enforceable are the campaign promises, both those of President Bolsonaro and those of President-elect Lula.

Will Guedes leave a cursed inheritance in the tax area? Not. In the fiscal area, Guedes’ legacy is positive.
In a column published on Thursday (17), Reinaldo Azevedo disagrees with me on both issues. He says that the Ploa for 2023 is unenforceable and that Guedes will bequeath a cursed tax inheritance to his successor.

Also on Thursday, a lengthy report by Fernando Canzian was published. The first graph shows the evolution of the primary surplus of the consolidated public sector until 2021. The improvement, since the nadir in 2016, is clear. In 2021, there was a surplus of 0.75% of GDP. We know that in 2022 there will be a new surplus.

We also know that the recent improvement is partly non-recurring due to the rise in commodities prices. It is better to look at the data from the IFI (Independent Fiscal Institution), which isolates the result from the economic cycle. As I discussed in the May 28 column, there was a clear fiscal improvement from 2015 to 2021.

Finally, if we look at Union spending in 2022, it will be 0.5 percentage points of GDP (already considering all 2022 extra spending) lower than in 2018. It will be the first time since redemocratization that a president bequeaths to himself or herself for his successor a smaller expense than the one inherited from the previous government.

There has therefore been an unequivocal fiscal improvement in recent years. It was obtained with Social Security reform; salary restraint in the public service, less hiring of civil servants, correction of the minimum wage only for inflation, among other policies. It is about real and structural fiscal improvement.

Evidently, the 2023 Budget does not provide for an increase in the Auxílio Brasil benefit from BRL 400 to BRL 600, nor a real increase in the minimum wage or maintenance of PIS/Cofins exemptions.
In his column, Reinaldo Azevedo demands that critics of the president’s speeches “present the problem and also a solution”. Demand more than fair.

On Thursday, Cláudio Frischtak, Marco Bonomo and Paulo Ribeiro presented in an article in O Globo a proposal to recover several social programs —removing the SUS queue, recomposing the Popular Pharmacy programs, school lunches and the National Fund for Scientific and Technological Development, in addition to implementation of the Aldir Blanc Law —and, additionally, guaranteeing a real increase in the minimum wage of 1.4% and the new BRL 600 Bolsa Família program. The extra cost would be BRL 80 billion in 2023.

It would be possible to permanently raise the ceiling by this amount. In order for there to be no sharp impact on the public debt, Lula could eliminate some expenses — in the current framework of social programs, the salary bonus could be eliminated, which would generate resources of R$ 20 billion.

There could be the creation of some tax, such as the charge on the distribution of dividends, mainly from companies that operate in the special tax regimes of Simples and presumed profit. You can think about increasing the tax rate on inheritance or large fortunes, among others. I addressed these and other possibilities in the April 8, 2018 column.

There are paths. What cannot happen is the president increasing public spending without there being a counterpart in the form of raising the tax burden or eliminating other expenditures.