Bolsonaro wants to sanction payroll exemption, but Economy demands tax compensation

President Jair Bolsonaro (PL) wants to sanction before the end of the year the bill that extends the exemption from the payroll of 17 sectors, but the Ministry of Economy sees legal obstacles, which opened an impasse within the government.

The exemption would end at the end of this year, but businessmen pressed, and Congress extended the policy until the end of 2023. The deadline for the approval of the bill is January 5, 2022.

According to the leaf, technicians from the economic area see the need for the government to adopt measures to compensate the waiver of revenue with the extension of the policy and, thus, meet the requirements of the LRF (Fiscal Responsibility Law).

In practice, Bolsonaro would need to endorse an increase in taxes or authorize the expansion of the scope of some tax in order to collect more and, thus, compensate for the losses with the tax exemption.

The annual waiver is calculated at around R$9 billion. The revenue opinion in the 2022 Budget, however, was approved without this estimate, hence the need for compensation.

Without it, according to leaf found out, the president could be accused of committing a crime of responsibility, subject to impeachment. Therefore, the Economy analyzes compensation options to present to the Planalto Palace.

The increase in the IOF (Financial Operations Tax) on credit operations that originally would support the permanent expansion of Auxílio Brasil in 2021, but ended up not being used for this purpose, could help to offset the exemption.

For this, however, the tax increase would need to be extended until the end of 2022. The decree issued by Bolsonaro in September extended the collection only until December 31 of this year. The hammer has not yet been hit in relation to that point.

The impasse pointed out by technicians from the Ministry of Economy triggered a reaction among parliamentarians who support the measure.

Deputy Jerônimo Goergen (PP-RS), who was the rapporteur of the proposal in the Chamber of Deputies, said there was a decision in the government to bring forward the presidential sanction, which would be published until Friday (31).

The thesis is that, with the sanction still in 2021, the extension would mean a continuation of the existing policy, not a new resignation. This, according to the deputies, would give legal certainty to the president to sign the law.

“For us, what matters is that the political agreement is fulfilled,” said Goergen.

The deputy stated that he spoke with the rapporteur for the 2022 Budget, deputy Hugo Leal (PSD-RJ), who is also discussing the matter with the government. Goergen released an audio in which Leal reports the political negotiations for the approval of the project.

“I was in Brasília until last night [terça-feira, 28], in a meeting not only with the economics area, but also with the political area of ​​the Planalto Palace. The indication is for the sanction of the payroll tax exemption project, as it is important”, said the Budget rapporteur.

“There is an understanding of all parties that, if sanctioned by the 31st, it does not correspond to a new deferral, a new request for this type of exemption. It would be a continuation of this exemption, so I would not need to make all the justifications, including pointing out where the compensations would come from. This is a resolved technical framework,” stated Leal.

According to the Budget rapporteur, there will be “no impediment” to the extension of the exemption.

The thesis defended by politicians is viewed with caution in the economic area, since other extensions of the payroll tax exemption were offset or previously included in the Budget.

Payroll exemption is a mechanism that allows companies in the benefited sectors to pay rates of 1% to 4.5% on gross revenue, instead of 20% on payroll.

The permit was created ten years ago as a way to reduce costs on hiring labor for some sectors. Since then, the policy has gone through a process of expansion and, more recently, a reduction in its scope. Currently, 17 sectors are still benefited.

The sectors reached by the measure are footwear, call center, communication, apparel and clothing, civil construction, construction companies and infrastructure works, leather, manufacturing of vehicles and bodies, machinery and equipment, animal protein, textile, information technology , communication technology, integrated circuit design, subway-railway passenger transport, collective road transport and road freight transport.