2023 Anuário Brasileiro do Cobre Brazilian Copper Yearbook 20 Given its importance to Brazil, tax reform has dominated the news in recent months. There is no doubt that our tax system is full of peculiarities and exceptions, but despite the clamor for simplification, whenever we consider changes, concerns are raised, especially because of the lack of clarity on some points. November 8 was a milestone on this subject – Federal Senate approved a draft bill which, with changes, now has to go back to the lower house before presidential approval. The creation of the Contribution on Goods and Services (CBS) tax to replace PIS and COFINS), the Tax on Goods and Services (TBS) tax to replace ICMS and IPI, and the Selective Tax (IS) to replace IPI may, at first, give the false impression that there has been no attempt to simplify the system, as we are replacing five taxes with three, with the possibility of replacing five taxes with four, if the contribution that may be created by the States and that will be levied on primary and semi-finished products is also maintained in the final bill of law. The draft bill undeniably has positive points, with the creation of Dual VAT (CBS/IBS), and listing them will help us understand its importance: • Unification of the rules related to taxable events, the calculation basis, differentiated regimes and taxpayers currently each tax has its own rule, which generates insecurity/litigation. • Tax collection adopting destination State/Municipality rates minimizing problems related to the Tax War, with the States and Municipalities having to provide infrastructure and conditions for the installation of new businesses. • Full non-cumulativeness (except for personal use) – all transactions subject to VAT will generate credit to the recipient currently, each federative entity interprets the right to credit peculiarly and individually, such as the concept of ICMS and PIS/COFINS input. • Calculation on the outside, meaning the tax is not part of the calculation basis transparent concerning how much these taxes represent of the price. • Locked definition of the tax rate Maintenance of the current nominal tax burden. Concerning Selective Tax, the objective will be to tax goods and services that are harmful to health or the environment to discourage consumption. On the other hand, we must highlight points that deserve criticism and that hinder the adoption of more appropriate reform. They are: • Sectors with different treatments the longer the list of segments, the higher the rate to offset such treatment. • Non-cumulativeness How will operations that do not generate credits be decided? What will be considered personal use? • The transition period The transition begins in 2026, with the requirement of 1% VAT, and these amounts can be offset with PIS/COFINS. In 2027, PIS/COFINS will be terminated, and the full CBS will be required, with changes to IPI, as well. In 2029, the transition to ICMS/ISS will begin, ending in 2033. Working with two tax regimes will be hard work. • The possibility of a contribution by the States being created This has never been discussed with society. If products subject to this contribution are exported, will Brazil continue to export taxes? • Authorization for the Municipal Executive to update the market values as the basis for calculating the property tax by decree. • Mandatory progressive ITCMD, creating concern that there will be an increase in the tax burden. We are experiencing a unique moment on the subject, and evolving towards an adequate text that simplifies tax can contribute enormously to the business environment in Brazil and attract new investment. Tax Reform A critical but constructive view By Pedro Cesar da SIlva, CEO of Athros Auditoria e Consultoria and Douglas Rogerio Campanini, Managing Partner, Indirect Tax Consulting, Athros SFAI Auditoria e Consultoria
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