Business sectors praise decision to reject controversial measure

12/06/2024

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Rodrigo Pacheco — Foto: Brenno Carvalho/Agência O Globo

After significant pressure from industry and agribusiness leaders, Senate President Rodrigo Pacheco returned on Tuesday part of the provisional presidential decree (MP) that limited social taxes PIS and Cofins credits. Mr. Pacheco said that it was a “constitutional decision, affirming the Legislative and reassuring the affected sectors.”

Mr. Pacheco’s decision was seen as an embarrassment for the government, especially the economic team. The last time such a return occurred was in 2021, during the Bolsonaro administration, involving a measure that hindered the removal of false internet content.

Following the announcement, Finance Minister Fernando Haddad said that the Parliament’s reaction “is part of democracy” and added that he did not find the criticism from the productive sector “undue.”

He further mentioned that the Federal Revenue Service team would work with Congress to find a solution to compensate for the tax revenue loss from the payroll tax relief for 17 labor-intensive sectors and municipalities—the goal of the returned decree. When asked if the government had a plan B, Mr. Haddad denied it but said, “There’s always a way to find a solution.”

“The Senate has taken part of the responsibility to try and build a solution, from what I understood from President Rodrigo Pacheco’s speech,” the minister said as he left the Finance Ministry headquarters.

The day before, the Senate President had a meeting with President Lula and agreed on a 24-hour deadline for the government to propose an alternative to the MP, which did not happen. One possibility was for the government to withdraw the provisional measure itself to minimize the perception of a failure in coordination.

“There is a substantial innovation in the MP with changes to tax rules that significantly impact the national productive sector, without observing the constitutional ninety-day rule, especially for PIS and Cofins compensations,” said Mr. Pacheco in the plenary when announcing his decision.

“Therefore, based on this very basic and obvious observance, and with absolute respect for the Executive branch’s prerogative, the President of the Republic in issuing provisional executive orders, what we see is a violation of the Constitution, which requires the impugnation of this matter with the return of these provisions to the Presidency,” he added.

After the announcement, Mr. Pacheco was applauded by opposition members. The leader of the Parliamentary Agricultural Front (FPA), Congressman Pedro Lupion, was also present.

Despite the discomfort, the government’s leader in the Senate, Jaques Wagner, not only praised but also thanked Mr. Pacheco’s decision. “The Honorable Mr. Pacheco, with your calmness and negotiating manner, instead of showing any outburst, ended up finding a solution that I can assure you: it has the applause of the President of the Republic, it has my applause,” said Mr. Wagner to Mr. Pacheco in the plenary.

In the same speech, Mr. Wagner said that Mr. Lula was uncomfortable with the decree and that maintaining the text would result in an “endless tragedy.”

“I want to say for the record here the role of the President of the Republic, who called you for a dialogue, along with the Finance minister, and expressed that he was clearly not comfortable, and you could find a legal and constitutional way to stop what would be an endless tragedy,” he said.

It was not only Mr. Lula who was uncomfortable. Members of the ministries of Agriculture (Mapa) and Development, Industry, Trade, and Services (MDIC) told Valor that they were unaware of the measure’s content until it was made public on Tuesday. These two ministries include the sectors that would be most affected by the restrictions.

Vice President Geraldo Alckmin was leading an official government delegation on a business trip to China and Saudi Arabia when he learned of the decree’s content through businesspersons accompanying the trip.

One source close to him said that Mr. Alckmin was “caught off guard,” as he did not have studies and data to counter the industrialists’ criticisms. The president of the National Confederation of Industry (CNI), Ricardo Alban, interrupted his participation in the official delegation and returned to Brazil early to act against the decree, holding meetings with the country’s main authorities, including President Lula.

After meeting with Mr. Lula, Mr. Alban told members of the ruralist caucus that the decree was “dead” and that he heard from the president himself that the matter would be withdrawn by the government or returned by Congress. Mr. Alban’s report of a private conversation with Mr. Lula caused even more discomfort in the government.

The decree’s return also created uncertainty about the legal effects of Mr. Pacheco’s decision. Senator Tereza Cristina questioned the Senate President about this during the session, amid doubts among business leaders on this point.

“All effects cease since the decree’s issuance, in the part impugned, which is the main part of the articles already referred to,” said Mr. Pacheco.

Historically, returning a provisional executive order, although possible, is not usual and has ramifications that vary from case to case, according to a note from the law firm Cascione Advogados sent to clients when the rejection was still a possible scenario. The text recalls MP 1068, issued during the Bolsonaro administration, which was returned by Congress through a summary rejection of the norm—in that case, the text was rejected and immediately revoked. In the case of MP 33, Congress also returned the text, but the norm remained in effect until it lapsed.

Lawyer Gabriel Baccarrini, from Cascione, said that the text returning the decree expressly states that the items would be “considered unwritten,” with the decree’s expiration. Therefore, it should not have effects. However, Mr. Baccarini added that the Senate’s own Rules of Procedure provide for the possibility of an appeal to the Constitution and Justice Committee.

Lawyer Fernanda Secco, a partner in the tax area of Velloza Advogados law firm, also highlighted the section of the act that states that the provisions limiting compensations were summarily rejected and considered unwritten, with the declaration of the end of the MP’s validity and efficacy, since its issuance.

*Por Julia Lindner, Caetano Tonet, Jéssica Sant’Ana, Rafael Walendorff, Beatriz Olivon — Brasília

Source: Vlor International

https://valorinternational.globo.com/