Tax exemption helps create jobs, companies and trade unions say
02/28/2024
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Alexandre Padilha — Foto: Fabio Rodrigues-Pozzebom/ Agência Brasil
President Lula signed a provisional executive order on Tuesday (27) that eliminates the reintroduction of taxes for 17 labor-intensive sectors. The issue will be addressed through an urgent bill sent to Congress. The information was released by the minister of Institutional Relations, Alexandre Padilha, in a video distributed on Tuesday evening.
“Signed today [Tuesday] by President Lula, it will be published tomorrow [Wednesday], paving the way for these negotiations to continue. The withdrawal from the provisional presidential decree of the specific point on the reintroduction of taxes on [some] economic sectors will be published tomorrow [Wednesday],” Mr. Padilha said.
The payroll relief system allows companies in 17 labor-intensive sectors to replace the 20% contribution on wages with a rate of between 1% and 4.5% on gross revenues. Companies and unions say that this model contributes to job creation by reducing hiring costs. The segments affected by the measure employ 9 million people.
Last year, Congress extended the measure until 2027. However, President Lula vetoed the bill, and lawmakers later overrode the Executive branch’s decision. Subsequently, in December, the government issued provisional presidential decree 1,202, outlining a gradual reintroduction of taxes. However, this provisional decree was also rejected by lawmakers, specifically due to the reintroduction of taxes.
The change announced by Minister Padilha impacts the provisional decree issued in December. According to the minister, two other points in the text—the end of the Emergency Program for the Recovery of the Events Sector (Perse) and the limitation of tax offsets—will remain in the proposal, which is already in place but must be analyzed by Congress.
“Perse is a program created at the time of the pandemic, and the pandemic is already over, which is starting to have a huge impact on public accounts,” the minister said.
The removal of the reintroduction of taxes was announced last week by Senate President Rodrigo Pacheco after a meeting with Senate leaders, Mr. Padilha, and Finance Minister Fernando Haddad.
Last week, lawmakers and businesspeople held an event in Congress in defense of the payroll relief. On that occasion, they presented figures from Desonera Brasil, a movement that brings together representatives from the 17 sectors affected by the rule.
According to Desonera, companies in these sectors formally employed 9.14 million people last year—an increase of 17.7%, compared to 13.5% growth in other sectors over the same period. According to the study, more than 728,000 jobs would not have been created since the beginning of 2012 without the exemption. In addition, the average salary in the 17 sectors was 41.8% higher than in sectors without the exemption. The calculations were based on figures from the Ministry of Labor and Employment.
*Por Estevão Taiar, Renan Truffi — Brasília
Source: Valor International