The issue will be dealt with by a bill of constitutional urgency
22/02/2024
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Senate President Rodrigo Pacheco — Foto: Roque de Sá/Agência Senado
Government and congressional leaders have confirmed an agreement to maintain the payroll tax exemption for 17 labor-intensive sectors. Following a meeting on Wednesday (21), Senate President Rodrigo Pacheco and Finance Minister Fernando Haddad stated that the proposed reintroduction of taxes on these sectors, which was suggested by the Executive branch at the end of last year, will be removed from the provisional presidential decree addressing the issue. Any changes will be suggested through a bill.
“The political negotiation is done, and any changes to the program will not be made through the presidential decree. The government has already agreed to this premise,” said the senator. “The tax relief on the 17 sectors has been maintained. That’s how it will be, and any changes will be matured through a bill,” he added.
The statement was made hours after a lunch attended by Mr. Pacheco, Senate leaders, Mr. Haddad, and the minister of Institutional Relations, Alexandre Padilha.
Mr. Haddad confirmed that the issue will be addressed through a bill of constitutional urgency. “That’s what we’re going to do,” the minister said when asked about the plan.
According to Mr. Pacheco, the government has promised to issue a new provisional presidential decree that removes the reintroduction of taxes from the text published in December.
The payroll relief system allows companies in some labor-intensive sectors to replace the 20% tax on wages with a rate of between 1% and 4.5% on gross revenues. According to businesspeople and trade unionists, this model contributes to job creation by reducing hiring costs.
Last year, Congress extended the measure until 2027. President Lula vetoed the bill, and then legislators overrode the president’s decision. At the end of December, the government issued another provisional decree to phase in the reintroduction of taxes.
The text set a 90-day deadline for the new rules to take effect. According to Mr. Pacheco, this made negotiations easier.
“Since there was a provision for this ninety-day period for discussion, there was the time needed for political negotiation, without rupture, so that there could be an understanding between the government and the legislators,” he said.
According to the agreement, the cap on tax compensation also included in the December presidential decree, will remain in the text. The government is still considering whether the end of the Emergency Recovery Program for the Events Sector (Perse), another point dealt with in the proposal, will continue in the text or will also be dealt with through a bill.
The agreement was signed on the same day that lawmakers and representatives of the productive sector called a press conference to defend the payroll relief.
The president of the National Federation of Call Centers, Installation and Maintenance of Telecommunications and IT Network Infrastructure (Feninfra), Vivien Mello Suruagy, also said that “it is past time to discuss” the issue. “This situation is causing us to hold back on all investments,” she said.
Lawmakers and businesspeople also presented figures from Desonera Brasil—a movement that brings together representatives from the 17 sectors. According to Desonera Brasil, companies in these sectors formally employed 9.14 million people last year—an increase of 17.7%, compared to the 13.5% growth in other sectors during the same period. According to the study, more than 728,000 jobs would not have been created since the beginning of 2012 without the payroll-tax cut. In addition, the average salary in the 17 sectors was 41.8% higher than in those without the relief. The calculations were based on figures from the Ministry of Labor.
The author of the bill passed in 2023 that extended the payroll relief until 2027, Senator Efraim Filho, argued that “the government had 10 months” last year to propose an alternative to ending the tax cuts.
*Por Caetano Tonet, Julia Lindner, Estevão Taiar — Brasília
Source: Valor International