Government says that extension of payroll tax does not need to be compensated

The law that extends the exemption from the payroll of 17 sectors of the economy until the end of 2023 was sanctioned by President Jair Bolsonaro (PL) on Friday (31) without the provision of a measure to compensate for the loss of revenue in the Budget.

According to the Planalto Palace, an orientation from the TCU (Court of Accounts of the Union) made it possible for the exemption to be extended without the need for compensation.

The payroll tax exemption, adopted ten years ago, allows companies to contribute with a percentage ranging from 1% to 4.5% on gross revenue, instead of 20% on employee compensation for Social Security (employer contribution ).

This represents a decrease in the cost of hiring labor. On the other hand, it means less money in public coffers.

Currently, the measure benefits call center companies, the computer industry, with development of systems, data processing and creation of electronic games, in addition to communication companies, companies that operate in collective road transport of passengers and civil construction companies and of infrastructure works.

The end of the exemption was scheduled for this Friday (31), but the benefit was extended after sanction —without vetoes— of a project proposed by the Congress.

“The sanctioned project is capable of offering incentives to the benefited sectors for the necessary recovery of the economy, mainly, in view of the reduction of fiscal burdens borne by employers”, stated, in a note, the General Secretariat of the Presidency of the Republic.

The policy generates a waiver of revenues of around R$9 billion per year.

The government discussed in recent days how to compensate the payroll tax. But, when sanctioning the project, it did not edit new measures that would neutralize the effect of the sanctioned project.

According to the note from the Palácio do Planalto, the TCU understands that, as it is an extension of an already existing tax benefit, compensation is not necessary.

In addition, an MP (provisional measure) was published, changing the way in which the tax exemption is calculated in Social Security accounts —companies benefiting from this measure to stimulate employment pay less taxes to Social Security.

“With the correction of the old methodology, there will be no creation of new budget expenditure, which made it possible to sanction the extension of the exemption with the resources already existing in the budget”, explained the General Secretariat of the Presidency of the Republic.

The sanctioned project also extends until the end of 2023 the increase in the Cofins rate applied to the import of products produced by the exempt sectors. The objective is to protect the national manufacturer.

In other acts published by the president, the government also ended tax incentives for companies in the petrochemical sector, with the end of the REIQ (Special Regime for the Chemical Industry).

Bolsonaro also enacted a law to renew the IPI exemption on the purchase of cars by taxi drivers and people with disabilities.