Haddad proposes a package of R$ 242.7 billion to improve public accounts

The Minister of Finance, Fernando Haddad (PT), announced this Thursday (12) a broad package of measures with the promise of delivering a fiscal improvement of R$ 242.7 billion in public accounts this year – enough to reverse the deficit and put the country back in the black in 2023.

Under pressure from the financial market to reduce the BRL 231.55 billion gap, aggravated by the PEC (proposed amendment to the Constitution) that authorized the expansion of expenses in 2023, Haddad is betting on the reversal of exemptions and on extraordinary measures to collect more. One of them is a Refis to renegotiate debts of individuals and companies with discounts.

Initiatives to raise revenue account for most of the economic team’s plan, with R$ 192.7 billion. Initiatives to reduce expenses represent a less significant slice, of R$ 50 billion.

The combination would be enough to lead the country to record a surplus of R$ 11.13 billion this year, according to calculations presented by the Treasury.

In a preventive way, however, the minister himself signaled, in a press conference, that part of the measures may not have the expected effect. “If you add the goal of each action, zero the deficit, [mas] we know that the goal of each action will not be achieved”, he said.

“We know there can be frustration, and even if [o governo] take measures to replace the frustration there is a delay that will happen, there is a ninety, an earlier date [até que medidas tributárias produzam efeito] and there are expenses that may arise, because we were not paid transparently by the previous government”, said Haddad.

According to him, the objective of the new government is to end the year with a deficit of between 0.5% and 1% of GDP.

The plan includes presidential decrees, ordinances and MPs (provisional measures), which are effective immediately, but need the approval of the National Congress to continue to be valid definitively.

Part of the measures may collide with group interests, such as the reversal of fuel tax relief, or depend on the effective adherence of taxpayers, such as incentives to reduce tax conflicts. A slice of the expected collection is also based on extraordinary actions, which will not be repeated in the following years.

The Treasury, in turn, maintains that a good part of the adjustment will be structural. In the portfolio’s calculations, the package is equivalent to an adjustment of 2.27% of GDP (Gross Domestic Product), of which 1.61% would come from permanent measures.

In 2024, for example, the government estimates a fiscal improvement of R$ 185 billion.

The measures were signed by President Luiz Inácio Lula da Silva (PT) at the Planalto Palace this Thursday, after a meeting with Haddad and ministers Simone Tebet (Planning and Budget) and Esther Dweck (Management and Innovation in Public Services). The two also participate in the press conference to present the initiatives.

This is the first action taken by the Lula government in the sense of trying to signal a commitment to the country’s fiscal sustainability, after the increase in expenses increased the fear in the financial market of an explosive trajectory of the public debt.

In an interview with Sheetthe secretary of the National Treasury, Rogério Ceron, stated that this scenario will not occur and said that the portfolio will seek to prevent debt from exceeding 80% of GDP, a very high level for an emerging country like Brazil.

One of the pillars of the plan targets the CARF (Administration Council for Tax Resources), an administrative court that judges tax disputes. The minister has drawn attention to the significant increase in the stock of lawsuits, which jumped from BRL 600 billion between December 2015 to more than BRL 1 trillion by October 2022.

In an attempt to reduce this liability, the Treasury intends to launch the “Litigation Zero” program, which provides for the renegotiation of debts of individuals and companies, with discounts and a period of up to 12 months for payment.

For individuals, micro and small companies, the discount would be 40% to 50% of the total amount of the debt, including the tax that originated the liability, in addition to interest and fine. The conditions would apply to debts of up to 60 minimum wages (R$ 78,120).

According to the Treasury, the debts that fall into this category represent more than 30,000 processes at Carf, with a total value of more than R$ 720 million. At the Federal Revenue Offices, there are more than 170,000 processes, totaling almost R$ 1 billion.

In the case of companies with debts above 60 minimum wages, the discount would be up to 100% on the amount of interest and fines, in the case of irrecoverable amounts or difficult to recover. The government will still allow the use of tax losses and a negative calculation base to settle 52% to 70% of the debt.

With the “encouragement to reduce litigiousness in CARF”, the government estimates to obtain R$ 35 billion in extraordinary revenues. There would also be a permanent gain of R$ 15 billion by reducing conflicts. The Treasury’s argument is that the greater integration between the Federal Revenue and PGFN (Attorney General of the National Treasury) makes part of the extraordinary impact perennial.

The estimate for the portfolio for collection with “extraordinary incentives for spontaneous reporting” is BRL 15 billion, with a permanent effect of BRL 5 billion.

Another source of extra income will be the raising of BRL 23 billion in assets currently deposited in the PIS/Pasep Fund, which have been idle for decades without any complaints from their beneficiaries. The redemption of these resources by the government has already been authorized by Congress through the PEC approved at the end of 2022.

In terms of measures with permanent effect, the government revised the revenue forecast this year, in the amount of R$ 36.4 billion. As shown to Sheetsince the transition, technicians had a diagnosis that revenues were underestimated in the Budget.

The Treasury still hopes to raise another R$ 30 billion this year with the so-called use of ICMS credits, a state tax. The measure is related to the judgment in the STF that removed ICMS from the PIS/Cofins calculation base in sales operations carried out by companies.

The problem is that the judgment did not consider the acquisition of inputs by companies, which continued to consider ICMS in the calculation base of federal taxes in these operations because this was more advantageous —they have a greater tax credit to be deducted later.

In practice, according to technicians, the distortion allows taxpayers to use a tax that has not been paid as a credit. Therefore, the government wants to correct the problem via MP, reestablishing the collection of taxes.

The Treasury also calculates an extra collection of R$ 28.9 billion with the reinstatement of federal taxes on gasoline and ethanol as of March.

At the beginning of the year, to avoid a jump in fuel prices, Lula decided to extend the incentive for diesel and cooking gas for 12 months, and for gasoline and ethanol for 60 days.

The measure faced resistance from the economic team, which wanted to recover a larger portion of the collection. On the other hand, the political wing continues to press for an extension of the tax benefit beyond 60 days, with an eye on a more prolonged impact on consumers’ pockets.

The package also includes an impact of BRL 4.4 billion with the reversal of the PIS/Cofins exemption on financial revenues from large companies – a measure adopted by the government of Jair Bolsonaro (PL) at the end of his term.

On the expenditure side, the list includes two measures. The first is a “review of contracts and programs”, estimated at R$ 25 billion. Another BRL 25 billion would come from a lower execution of the amounts authorized in the Budget —among technicians, for example, there is a perception that the government will not be able to execute all the amount foreseen for investments in the Budget.

OTHER MEASURES INVOLVING CARF

The minister also announced the end of ex officio appeals for amounts below R$ 15 million – when the Treasury automatically appeals against a defeat suffered in the dispute for a charge.

With the new measures, if the taxpayer wins in the first instance, the litigation ends definitively. This would lead to the extinction of around BRL 6 billion in charges, discussed in almost a thousand processes today at Carf.

The government is also going to give more power to the regional police stations to try higher-value conflicts, currently accumulated in court and that drag on for years. They will be able to analyze processes involving up to one thousand minimum wages – today, the cut is up to 60 floors. The expectation is to reduce the number of lawsuits by more than 70%, letting the court centralize its work on the most valuable discussions.

Another announced measure seeks to reestablish the so-called “quality vote” in the Carf, a device that assured the Revenue Service of maintaining the tax collection in the event of a tie in the judgment — something common in disputes involving large sums, since the court is formed by representatives of the Tax authorities and taxpayers.

The tiebreaker in favor of the Revenue was extinguished in 2020, during the Bolsonaro government, imposing billionaire defeats on the Union in new trials.