Vetoes on benefits in an election year expose clashes between Planalto and Economy

The succession of requests from the Ministry of Economy for President Jair Bolsonaro (PL) to veto, in an election year, a series of tax benefits irritated the Planalto and exposed, once again, the clash of the political wing with the team of Minister Paulo Guedes when the matter is tax.

The next clash should take place around the 2022 Budget, according to the assessment of palace assistants, parliamentarians and members of the economic area.

Guedes’ portfolio had a 50% cut in its allocations for day-to-day expenses and investments, which made it impossible for the portfolio to operate in the first half of the year.

as showed the leaf, the ministry was the hardest hit by the scissors, which was seen within the government as retaliation from Congress, with whom Guedes has a turbulent relationship.

The most prudent, according to sources in the economic area, would be to veto some amendments by parliamentarians to the Budget, which irrigated other ministries with resources.

The veto would already guarantee the necessary space to, later, recompose the expenses of the Economy with a bill to be sent by Bolsonaro. Without reserving space, project approval can be even more challenging.

However, Guedes’ team knows that the request for vetoes will increase the friction with the Planalto. It is unlikely that the political wing will take up this fight with Congress at a time when Bolsonaro is also tailoring his political alliances to run for re-election.

The main consequence, according to parliamentarians and palace assistants, is that the government must start the legislative year already on a war footing — which is especially bad given the proximity of the elections.

Planalto’s relationship with deputies and senators is already in turmoil due to the lack of payment of amendments promised at the end of last year. According to reports, at the last budget meeting of the year, between Christmas and New Year, Guedes did not release R$ 600 million that had already been agreed by Flávia Arruda.

The wear fell in the lap of the minister of the Secretariat of Government, who had the head requested by the leader of the Republicans, Hugo Motta (PB), a member of the government base in Congress. The temperature only dropped when Bolsonaro gestured to the minister: “Where is Flávia Arruda going wrong? I don’t know.”

In recent weeks, the Economy has asked for vetoes on projects to extend the payroll tax exemption for 17 sectors, renegotiate the debts of micro and small companies and extend the program that gives tax benefits to the semiconductor industry.

In the economic area’s justification, the waiver of revenue from these projects was not provided for in the 2022 Budget, which made it mandatory to adopt compensatory measures – such as tax increases.

Bolsonaro ignored the recommendation of Guedes’ team in two cases (exemption of payroll and semiconductors), using the argument presented by his legal advisors that the projects only extended benefits that already existed.

as showed the leaf, the TCU (Union Audit Court) already clarified, in 2010, that benefit extensions must also respect the LRF (Fiscal Responsibility Law) and have a compensation measure. The court has already asked the government for an explanation.

In the case of Refis for micro and small companies, Bolsonaro signaled that he would once again go against the economy in the name of sanctioning the project and asked for solutions. But the president backed off at the last minute because the implementation of the benefit would violate the electoral law, in the understanding of his legal advisors.

In an interview with journalists last Saturday (8), Bolsonaro exposed the differences with Paulo Guedes’ team and said that the portfolio “leaves to be desired”.

“We won the issue of sanctioning the tax exemption, which was of interest to you. We won. The economy had asked for a veto, to make it very clear. It is my government. (…) The Economy had also asked for a veto on the IPI exemption for taxi drivers and disabled. We went against the economy and ended up winning without risk to our side”, said the president.

“Unfortunately, the economy does an exceptional job for us, but at times it leaves something to be desired”, he added.

Bolsonaro, in turn, has already signaled support for the overthrow of the Refis veto for micro and small companies, which will be analyzed by Congress when the legislative work returns in February.

The decision to bar the law, published in the Official Gazette last week, aroused the ire of parliamentarians. In the first days of the year, congressmen focused their criticism on Guedes and his team.

Even with the official version that opposition to the benefit occurred as a result of intervention by the SAJ (Secretariat of Legal Affairs), which feared the accusation of electoral crime, parliamentarians blamed the Minister of Economy for the veto.

The demand came even from government parliamentarians and close to Bolsonaro. The deputy leader of the government in Congress, Jorginho Mello (PL-SC) —author of the project providing for the refinancing program— even called Guedes directly, who was on vacation in New York.

A government leader claims that the minister committed a “mistake” with the National Congress, especially with its leaders, who in December managed to approve the difficult PEC (Proposed Amendment to the Constitution) of the Precatórios, yielding on some points, but keeping the space intact. open tax in the Budget.

Guedes would have promised in recent days to some parliamentarians that he will not leave small and micro-enterprises “in hand”

Leaders of parties close to the government avoid talking about a crisis with the Minister of Economy and his team, but reinforce the belief that he was responsible for blocking Refis and that this results in certain dissatisfaction.

“I don’t believe in creating problems and obstacles, but Congress must make use of its powers and the tendency is for the veto to be overturned. [ao Refis]”, says the DEM leader in the Chamber, Efraim Filho (PB).

“I assess that the economic team’s vision of prioritizing collections prevailed, while in Congress the valorization of the productive sector will prevail, keeping the doors open [das empresas], job maintenance”, he adds.

Although less noisy, the veto also affects the relationship of the economic team and the government with the president of the Senate and the National Congress, Senator Rodrigo Pacheco (PSD-MG). Pacheco was one of the main supporters of Refis and contributed to articulating its vote and approval. Wanted, Pacheco declined to comment on the presidential veto and whether it affected Congress’ relationship with the economic team.