Page 10 - ENGLISH MONTT GROUP, MAYO 2024

MONTT GROUP MAGAZINE - 2024 www.MONTTGROUP.cOM
BRAzIL
tax reforM aDvanCeS
the project that will allow the entry into force of the recent brazilian tax reform is already in congress. the new regUlations, which will begin to operate between 2026 and 2033, constitUte a revolUtion in the coUntry and promise to simplify taxes as mUch as possible, attract investment and increase gdp by more than 10 percent.
The Government of Brazil has just sent to Congress a bill that addresses the regulations of the tax reform approved at the end of last year, on November 29th, 2023, and that, among other measures, establishes a Value Added Tax (VAT) of 27 percent, one of the highest rates in the world, after Hungary, and with which 3,500 taxes are replaced.
This proposal, which seeks to make the reform operational, consists of more than 300 pages and 500 articles. The Minister of Finance, Fernando Haddad personally addressed the Chamber of Deputies, with a liberal and conservative majority, to deliver the document, which aims to establish the new provisions. This last measure was somewhat controversial, since the previous basic basket was exempt from taxes for a social issue, but now there are some products that are taxed. This rule also includes a reduction in the full VAT rate of 40 percent for sectors such as health, education and transportation and a refund of 50 percent of what the poorest consumers pay in the
VAT will be returned in cash for expenses in gas, electricity and water.
It is expected that the regulation will be approved in Congress before the middle of the year, although a second project related to the administrative aspect of this reform has yet to be sent to the legislative apparatus and is being analyzed by the authorities.
a true revolution
The constitutional amendment that gave rise to this change occurred after 30 years of failed attempts by Parliament to rationalize a scheme, which the World Bank (WB) once described as “the most complicated tax system in the world.” to the point that a company requires more than 1,500 hours a year to comply with the country’s tax code, which represents five times the Latin American average and implies, by far, one of the longest processes among 190 countries analyzed by the WB.
More than the amount of taxes that Brazil has, which actually has many, the problem lies in the several regulations that the 26 existing states have, plus the federal district and the 5,568 municipalities, that often overlap and contradict each other.
An important part of these laws were drafted during the previous Government of Jair Bolsonaro, but the merit of the current President, Ignacio Lula da Silva, and his Minister of Finance, Fernando Haddad, lies in having led the project to the end and achieving its approval, despite the fact that the Workers’ Party has a minority in Parliament.
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