Bolsonaro meets Guedes and opposes Tarcísio by vetoing benefit to the port sector

President Jair Bolsonaro vetoed a tax benefit to the port sector in response to requests from Minister Paulo Guedes (Economy) and contrary to the will of the holder of the Infrastructure portfolio, Tarcísio de Freitas.

The measure was foreseen in the bill that changes cabotage in the country, a proposal called BR do Mar. The tortoise was inserted during the text processing in Congress, after articulation of interested companies.

According to the text, the Reporto (Tax Regime for Incentive to Modernization and Expansion of the Port Structure) would be re-established in 2022 and 2023. The benefit was created in 2004 and lasted until the end of 2020.

The regime allows the exemption of goods and also import tax exemption on the purchase of machinery, equipment, spare parts and other goods for the sector when there is no similar national. The project also expanded the benefited segments.

AT leaf, the Ministry of Economy reported that the elimination of the measure in 2021 generated approximately R$ 260 million per year to the public coffers.

The government stated in the justifications for the veto that the proposal is unconstitutional and contrary to the public interest by generating revenue waivers without presenting an estimate of the budgetary impact of compensatory measures.

According to the government, the text violates the Fiscal Responsibility Law, the Budget Guidelines Law and the Constitution – including the part of a recent amendment that provides for the gradual reduction of tax incentives.

“Also, the legislative proposal goes against the public interest, since the Reporto would remain too broad and open, and would create a subjectivity in what could or could not be contemplated by the benefits with the possibility of deviations for other uses, which would make it incompatible with guidelines of the Federal Court of Auditors to prove the amounts relieved and their return to society”, says government text published in the Official Gazette of the Union.

Guedes is traditionally opposed to special regimes for specific sectors, and his portfolio was against a new Reporto. Altogether, the various benefits and exemptions in the tax system demand more than R$330 billion annually (in programs aimed at different areas, such as health, housing, work, services and social assistance).

The Ministry of Economy intended to eliminate several of these regimes with tax reform, as it understands that removing loopholes creates a more neutral and fair system for all. One of the main criticisms of the current model is precisely the number of different rules, which increases legal complexity.

In addition, the understanding is that special regimes demand inspection and control of company requirements, a process that can generate conflicts between the Federal Revenue and taxpayers.

Tarcísio defended the measure because he considered it beneficial for infrastructure companies and because he understood that the cost would be low for the public coffers.

Among the companies, there were also differences. Abimaq (Brazilian Association of Machinery and Equipment Industry) was against the measure, considering that it stimulated imports to the detriment of national manufacturers.

“Reporto’s project greatly harms the national machinery and equipment industry,” he told leaf the president of Abimaq, José Velloso Dias Cardoso. “Like most special regimes aimed at large interest groups, Reporto ends up creating an import bias”, he says.

A number of other business associations were in favor of Reporto. Among them, Abifer (Brazilian Association of Railway Industry), Abratec (Brazilian Association of Container Terminals), ABTL (Brazilian Association of Liquid Terminals), ABTP (Brazilian Association of Port Terminals), Abtra (Brazilian Association of Bonded Terminals and ), ANTF (National Association of Railway Carriers), ATP (Association of Private Port Terminals) and Fenop (National Federation of Port Operations).

Representatives of the entities say to the leaf who will try to reverse Bolsonaro’s veto, which can still be overturned by Congress.

According to the entities, the investment portfolio in the sector could be affected because the continuation of the benefit was being considered in the contracts and projects. Now, they say, requests for economic-financial rebalancing in contracts and a reduction in applied values ​​can be aroused.

The entities also argue that the regime is crucial for the government’s PPI (Investment Partnership Program) – which provides for the implementation of new railroads in the country, auctions of port terminals, public announcements of private terminals and the extensions of the current concession contracts for railroad.