Government leader says TCU can loosen rules and open the way for payroll tax – 11/10/2021 – Market

The government leader in the Senate, Fernando Bezerra (MDB-PE), stated that the TCU (Court of Accounts of the Union) can review its understanding of the need for compensatory measures for initiatives in which the Executive gives up tax revenue.

A new court resolution on the matter is expected to be voted on next week.

With the measure, it would be possible to extend the exemption from the payroll for 17 sectors without necessarily using the fiscal space opened by the possible approval of the PEC (proposed amendment to the Constitution) of the Precatório, which defaults on judicial debts of the Union.

Today, the tax relief —a measure aimed at reducing the cost of hiring labor— is accounted for as an expense for the government in the Budget.

The estimate is that, if extended under current rules (need for compensation), the expense would be in the order of R$8.3 billion next year.

Without the requirement for compensation, the bill that extends until 2026 the exemption from the payroll for the sectors that employ the most in the country should no longer be vetoed by President Jair Bolsonaro (no party).

The proposal must be voted on in the CCJ (Committee for the Constitution of Justice) of the Chamber next week. Behind the scenes, members of the government’s base in the collegiate say there is support for it to be approved.

This Wednesday (10), the rapporteur, Deputy Delegate Marcelo Freitas (PSL-MG), presented to the CCJ an opinion on the admissibility of the proposal.

The current format of the text does not provide a measure to compensate for the losses to public coffers. This, according to government officials and congressional experts, is contrary to budget rules.

If TCU changes its understanding, the government should not oppose the project.

Bezerra was chosen this Wednesday (10) as the rapporteur of the PEC of Calote in the CCJ of the Senate.

This PEC provides for a dribble in the spending ceiling (which limits the increase in expenses) and changes the form of payment of court orders (debts of the Union recognized by the courts).

With this, it would be possible to increase the ceiling by around R$90 billion in 2022, making possible some measures, such as Auxílio Brasil, of at least R$400 per month.

In conversation with journalists, the senator was asked about the possibility of using the open fiscal space with the proposal to extend the payroll exemption for five years, a demand of the business class.

Bezerra then said that he spoke with TCU minister Aroldo Cedraz and that he was informed of a consultation made by the Senate on the need for compensation for fiscal waiver measures.

“This decision does not depend on the fiscal space [de prorrogar a desoneração da folha de pagamento]. I spoke today with minister Aroldo Cedraz and there is a consultation made by the president [do Senado] Rodrigo Pacheco when voting on the Refis matter, for which I was the rapporteur in the Senate, who seeks to review a TCU resolution that required [compensação] for the reduction of fines, interest or for the continuation of tax relief programs, “said the government leader.

“The TCU resolution requires compensation to be offered, and then you would have to identify fiscal space within the Budget. But there is already a statement from the TCU technical area saying that compensation is not necessary in these cases,” said the senator.

Bezerra also stated that the court is working on a new resolution on the matter, which should be voted on next week.

“In the case of the 17 sectors that are exempt, this revenue is not entering the Union’s coffers. Therefore, if there is a possibility of a new TCU resolution, which is expected to be voted on next week, Wednesday, we will have created the conditions from a technical point of view, so that we can advance in the appreciation of this matter in the Chamber,” he said.

Two weeks ago, Pacheco sent an inquiry to TCU about the need for a compensatory measure for Refis —a debt renegotiation program in good conditions— if it is provided for in the Budget and does not cause risks to the fiscal targets. This is because there is an understanding by the government that these compensations are mandatory, according to the LRF (Fiscal Responsibility Law).

TCU was contacted this Wednesday night regarding the conversation between Bezerra and the minister and the possibility of voting on a resolution on the matter.

The court said that the matter is addressed in an in-process consultation, in which the documents are not currently public.

“The consultations deal with a theoretical issue and not a specific case. There is still no court decision. The documents are not public at the moment”, the text states.

The payroll tax exemption, adopted by the PT government, 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 operating in collective road transport of passengers and civil construction companies and of infrastructure works.

Representatives of these segments and deputies who articulate the extension of the measure until December 2026 argue that the withdrawal of the benefit would raise the costs of companies, which would put jobs at risk at a time when the country is trying to recover from the crisis caused by Covid-19.

Amid the articulation to approve the PEC of Precatório in the Chamber, the president of the Chamber, Arthur Lira (PP-AL), signaled to allies that he would leave the way clear for the project that foresees the extension of the exemption.

The text is awaiting a vote in the CCJ of the Chamber. If approved, it should go straight to the Senate. The project needs to be sanctioned by the end of this year to postpone the tax benefit.

The economic team, despite not agreeing with this type of measure that benefits only some sectors, will not oppose it.

Earlier, Lira defended, in a social network, that the 323 deputies in favor of the PEC of the precatório in the second round “voted yes for Auxílio Brasil of R$ 400, they voted yes for the renegotiation of the municipal debts, they voted yes for the possibility of extension of the payroll tax relief, which will guarantee thousands of jobs”.

Lira had been using the possibility of the PEC freeing up space for the extension of the payroll as one of the arguments to try to convince deputies to support the text.

A day before the vote on the first round of the text, he argued that the extension would be possible after the PEC expands the space in the Budget for expenditures from 2022.

The extension of the benefit, however, is not directly linked to the approval of the text, as confirmed by Lira in a later interview. The expectation of government allies is that, in practice, the PEC will facilitate negotiations for the exemption.

Recently, Lira even said that Congress was studying alternatives to deal with the permanent exemption from the payroll, but did not give details.

The economic team even started to liaise with deputies to propose a broad exemption — to all sectors of the economy. This is the fiscal measure advocated by Minister Paulo Guedes (Economy). However, the plan did not go forward.

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