The amount is equivalent to 30% of the government’s net income in the year and exceeds the deficits of the Social Security and the retirement regime of the federal servants
With a primary deficit target of R $ 159 billion this year and with a spending ceiling for the next two decades, the government would be better able to clean up the public accounts, according to the Brazilian Court of Audit (TCU), granting fewer incentives for certain sectors of the economy. The TCU report on government accounts in 2017, approved with caveats last Wednesday, 13, showed that tax waivers totaled $ 354.7 billion last year.
The amount is equivalent to 30% of the government’s net income in the year and exceeds the deficits of the Social Security and retirement plans of federal servants, which totaled R $ 268.8 billion in 2017. According to the TCU, 84% of the resignations have a term indefinite, which causes the loss of revenue to be incorporated into government accounts.
The Fiscal Responsibility Law establishes that each fiscal waiver be funded with some revenue, either with the increase of other taxes or with the increase of the collection generated by the development of the economy. The TCU, however, found that 44% of fiscal incentives are not monitored by any body, which prompted the Minister Bruno Dantas to recommend that the Finance, Planning and Household Ministries set up a working group to verify the effectiveness of tax exemptions.
According to the Federal Revenue Service, the exemptions (which make up part of the tax exemptions) are stabilized in 2018, after falling slightly in 2017. From January to April this year, according to the most recent data, totaled R $ 27.577 billion, against R $ 27.631 billion in the same period last year. Revenue numbers are lower than those of the TCU because the Treasury takes into account only the most recent waivers and incorporates the losses of special regimes established for a long time into the normal collection flow.
Tax analyst Renato Faria from Peixoto & Cury Advogados, says that the economic team will need, at some point, to rediscuss tax waivers to continue providing public services in a scenario of increasing resource constraints. “An important fact is that the value of the tax waiver that was estimated to have payroll exemption outweighed the health portfolio investment. All this when we have a SUS [Unified Health System] deficit, “he criticizes.
In addition to the denunciations, the lawyer criticizes the successive programs of renegotiation of debts of taxpayers, dubbed Refis, that represent loss of collection because of the discounts in the fines and the interest approved by the Congress. “In recent years, many companies have experienced difficulties in paying taxes, but the systematic renegotiations in the last 15 years reward the evader and punish the entrepreneur who pays taxes on time and has the competitiveness impaired,” he claims.
Fiscal analyst Thiago Taborda Simões, from Simões Advogados, defends the increase in the inspection of counterparts by companies from sectors benefiting from special schemes. “The inspection should not be restricted to the payment of taxes, but also cover the fulfillment of the conditions to receive the incentive, such as job creation, investments in technology,” he cites.
According to him, exemption from taxes in the middle of the productive chain does not benefit society. “This type of exemption messes up the tax system and creates distortions because the cost is assumed by the next sector of the chain and passed on to the consumer, who ultimately pays the bill in the final price,” he adds.
Part of the tax benefits were lowered in May to pay for the reduction of taxes on diesel after the truck drivers strike. In total, R$ 4.01 billion of disbursements were reversed as follows: R $ 2.27 billion from the reduction of Reintegra (export support program), R$ 830 million from the payroll reimbursement, R$ 740 million with the increase of tax on preparations for the production of soft drinks and R$ 170 million with the revocation of the special regime of products destined to the petrochemical industry.
The willingness to move forward in withdrawing incentives faces resistance from the economic team. In a study released late last year, the Ministry of Finance (SEAE) Secretariat of Economic Monitoring said that it was against the resumption of taxation on profits and dividends and the partial reversal of Simples Nacional, a special scheme for micro and small companies that did the government lost R $ 13.7 billion last year. For pulp, the measures would increase the tax burden and reduce Brazil’s competitiveness.