The government of Jair Bolsonaro (PL) ignored technical opinions from the Special Secretariat of the Federal Revenue, the Attorney General’s Office of the Treasury and a recommendation from the Ministry of Economy to extend the payroll exemption at the end of last year.
The bodies had pointed out that the measure was unconstitutional and illegal, according to information that is in documents requested by a group of tax experts, through the LAI (Access to Information Law), and obtained exclusively by the leaf.
On December 31, President Bolsonaro sanctioned the law that extends the payroll tax exemption for 17 sectors for two years.
The policy would end on January 1, but the text that guaranteed the extension of the program was published in an extra edition of the DOU (Diário Oficial da União).
The measure was created to reduce the costs of hiring workers: instead of companies paying 20% ​​on the payroll, they can pay rates from 1% to 4.5% on their gross income.
According to an opinion of December 23, 2021, from the Federal Revenue, the recommendation was that the extension be vetoed, as it violates both the principles of the Constitution and the obligations provided for in the Fiscal Responsibility Law and in the Budget Guidelines Law.
“For all the above, it is recommended that the Special Secretariat of the Federal Revenue of Brazil propose a veto (…), due to unconstitutionality and contrary to the public interest, by disregarding the prohibition of differentiation or substitution of the calculation base (… ) and the budget rules provided for in articles 14 and 126 of the Fiscal Responsibility Law (LRF) and the Budget Guidelines Law (LDO) for the year 2021, respectively.
Tax expert Breno Vasconcelos, a partner at the Mannrich e Vasconcelos office and a researcher at Insper, recalls that in December 2020, Congress voted to extend the exemption until December of the following year. Bolsonaro vetoed the measure and the veto was overturned.
“Following, he filed an ADI (Direct Action of Unconstitutionality) using the same arguments that, now, the Revenue and the Attorney General’s Office used to suggest the full veto of this new extension of the benefit”, says the tax expert.
At the time, the president even argued that a compensatory measure was not foreseen for the tax waiver and that the possibility of replacing the base of the sheet had been excluded in the 2019 pension reform, the same points mentioned in the opinion of the Revenue now.
“The proximity of the election seems to have changed the perception of the fiscal issue”, says Vasconcelos.
​The PGFN has already imposed secrecy on its opinion. But a later order signed by the Attorney General of the National Treasury, Ricardo Soriano de Alencar, points out the reasons that made the body also recommend the veto to the continuation of the exemption.
According to the document, the veto could be revised, if there was an estimate of the budgetary impact both in the year in which it came into force and in the two following years, in addition to compensation measures canceling the effects of the reduction in revenue with the exemption.
On December 31, Marcelo Pacheco dos Guaranys, the executive secretary of the Ministry of Economy, who was acting as deputy minister of the economy, also sent a letter and a dispatch to the Chief Minister of the General Secretariat of the Presidency suggesting the full veto of the bill. , for unconstitutionality and contrary to the public interest. The two documents are based on analyzes by the Attorney General’s Office and the Special Secretariat for Revenue.
The exemption was a demand from businessmen from the benefited sectors, and Congress had decided to extend the measure until the end of 2023, a deadline that was confirmed by the president.
The sectors benefited include footwear, call centers, communication, apparel and clothing, construction, leather, vehicle and body manufacturing, information technology and transportation, among others.
In an interview with journalists in January, Bolsonaro even mentioned that he had diverged from the economy on the issue of exemptions, by exposing differences with the team of Paulo Guedes. “We won the issue of sanctioning the payroll tax exemption, which you were interested in. We won. The economy had asked for a veto, [vou] make it very clear. It’s my government.”
Sought, the General Secretariat of the Presidency of the Republic said that it was up to the Ministry of Economy to comment on the matter. The Ministry, in turn, forwarded the demand to the Federal Revenue, which replied that it would not comment.
CRIME OF RESPONSIBILITY IS NOT A CONSENSUS AMONG JURISTS
The extension of the payroll exemption divides specialists in public accounts and representatives of economic sectors. Those in favor argue that the measure is important to avoid costs and job losses, in a delicate economic moment. Critics argue that the measure is expensive and has low effectiveness.
Furthermore, in the opinion of EloÃsa Machado, a professor of constitutional law at FGV (Fundação Getulio Vargas), the violation of article 126 of the LDO can be configured as a crime of responsibility on the part of the president.
“The Constitution gives special importance to the LDO, as it is the instrument that reveals the State’s investment priorities, based on the contribution of all Brazilians. It is the maximum representation of our priorities and our collective choices, therefore, it is permeated with controls and procedures.”
She points out that the violation of article 126 of the LDO pointed out in the opinion of the Revenue is not tangential or superfluous. “Outside of the legal conditions, the waiver or reduction of income is no longer legitimate and can mean privileges. If it is confirmed that the conditions of article 126 of the LDO have not been fulfilled, it can be argued that there is, in the case, a hypothesis of crime of responsability.”
Rafael Mafei, professor at the USP Law School and author of “How to Remove a President”, considers that the veto recommendation is not the same as a budget law and that the decision to veto or not is the prerogative of the president. “I don’t see how this can result in a crime of responsibility.”
The lawyer, however, says he believes that the opinions will be useful for those who want to take the matter to court. “I think they attest to the political mismatch between the ministries linked to the Budget, which seem to have some concern with the quality of public accounts, and the Executive, which is obviously less concerned about it.”
Mafei adds that the episode should have a political impact and that it should be exploited by the government’s opponents, further wearing down the president with the market.
According to a report published by leaf At the beginning of January, the government tried to embody the narrative that Bolsonaro’s sanction, as it was carried out in 2021, means the extension of an existing policy, dispensing with new compensation.
The TCU (Union Court of Auditors) even demanded that the government demonstrate that it complied with the requirements of the LRF. According to the Court, there is a process that, in addition to other issues, deals with the extension of the payroll tax exemption and will serve as a subsidy for a specific chapter in the 2021 government accounts.
“In it, steps were taken to Organs responsible bodies, to obtain information. There is still no decision by the Court”, says the TCU.
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