Government wants to correct IRPF table in election year, but gives up higher cut in IPI

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The Jair Bolsonaro (PL) government intends to readjust the IRPF (Individual Income Tax) table and expand the exemption range in 2022, the election year.

The idea of ​​an additional cut in the rates of IPI (Tax on Industrialized Products) was abandoned by the government, according to a member of the economic team.

To decide on the correction of the IRPF table, the technicians are estimating the amount of space left in the fiscal target for the government to give up more revenue. The LDO (Budget Guidelines Law) of 2022 authorizes a hole of up to BRL 170.5 billion.

According to the government source, there is still no defined value for the new exemption range, currently at R$ 1,903.98.

Last year, the government proposed a broad reform in the IR, in which one of the measures was to raise this range to R$ 2,500.00. The source, however, warned that it is not yet known whether it will be possible to reach that value.

The correction of the table would alleviate the discount suffered by salaried workers in the remuneration received from the validity of the measure.

This Thursday (7), the Minister of Economy, Paulo Guedes, had already signaled the government’s intention to use excess collection to correct the IRPF table and reduce corporate taxation, measures that did not advance in the proposal presented to the Congress.

The relief in the tax burden of companies is also on the economic team’s radar, although, in an election year, there is a preference for the correction of the table for individuals.

The teams even simulated a cut in corporate taxation from 34% to 30%, but technicians warned of the risk of ending up with too much embezzlement of federal revenue.

On the other hand, the government gave up on making an additional cut in IPI rates. In February, the Economy announced a linear reduction of 25%.

The intention was to deepen this cut to 33%, but taking away from the scope of the measure the classes of products made in the Manaus Free Trade Zone.

The reversal of the cut for these items was a demand from the bench of parliamentarians from Amazonas. As the Free Zone already has its products exempt from IPI, a reduction for the others ends up taking away the region’s competitiveness.

An agreement was made between the government, via the Ministry of Economy and Congress, for the exclusion of these products from the scope of the IPI cut. The other items, in turn, would have the reduction increased to 33%.

In exchange, parliamentarians would vote in favor of the project that exempted diesel from charging PIS/Cofins, at a cost of R$ 14.9 billion for the Union this year, and also forced governors to change the collection of ICMS (Imposto sobre Circulation of Goods and Services) on fuel.

A member of the economic team, however, claims that the states’ decision to “break the agreement”, setting a new ICMS rate ensuring the same collection as before the change, angered the government.

According to this source, President Jair Bolsonaro determined, on the morning of this Friday (8), the suspension of the additional cut of the IPI.

Until Thursday (7), Minister Paulo Guedes (Economy) continued announcing the reduction of taxes for the goods industry.

as showed the sheet, the government should also cut the tax incentive for soft drink concentrate manufacturers installed in the Manaus Free Trade Zone. The measure would offset part of the waiver resulting from the debt renegotiation program of MEIs (individual microentrepreneurs) and small companies from Simples Nacional.

The compensation is a requirement of the LRF (Law of Fiscal Responsibility), since the adhesions of the taxpayers are made through discounts in fines and interest. The Federal Revenue calculates a waiver close to R$500 million.

According to government sources, Bolsonaro is upset with the bench of parliamentarians from Amazonas, to whom he attributes the articulation behind a lawsuit that seeks to overturn the 25% linear cut in the IPI (Tax on Industrialized Products) — a measure taken up by the president as positive banner of its mandate.

The Palácio do Planalto insists on cutting the benefit of soft drinks to send a message to the bench, which has among its members Senator Omar Aziz (PSD-AM) – with whom Bolsonaro also antagonized when the congressman presided over the CPI (Parliamentary Commission of Inquiry) of Covid-19.

The companies that produce the syrup for soft drinks and are located in the Free Zone are exempt from IPI, but even without paying taxes they generate tax credits for large bottling companies that purchase the concentrate. The benefit is equivalent to the amount of the soda syrup tax.

Until the end of February, the rate was 8%, but thanks to the 25% linear tax cut, promoted by the Ministry of Economy, it had already fallen to 6%. Now, the rate should drop to 4%. The lower this percentage, the fewer credits large companies have to deduct their taxes.

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