The Federal Court of Accounts (TCU) announced that the benchmark rate for the tax would be 11.3%. The CNI acknowledged the unprecedented assistance provided by the court in setting the rate, but believes the figure is higher than necessary to maintain the tax rate

“Further discussion is needed to determine the final rate, which will be set by the Senate by December 15,” the CNI said in a statement.

In the confederation’s view, the Senate’s review must “weigh political and technical considerations,” drawing on TCU’s study, and “strike a balance between the expectations of consumers and those of productive sectors.”

The confederation said the tax rate already is above the threshold appropriate for a developing country and warned against the “shortsighted view that there are no limits to imposing new costs on consumers.”

If senators do not approve the rate by December 15, the figure set by the TCU will take effect.

The tax reform replaces the Social Integration Program (PIS), the Contribution for the Financing of Social Security (Cofins), the Tax on the Circulation of Goods and Services (ICMS) and the Tax on Services (ISS). It also reduces the rate of the Tax on Industrialized Products (IPI) to zero for most products. The reform creates the CBS and the Tax on Goods and Services (IBS) to replace these levies.

According to CNI, TCU’s projection was based on the average tax rate from 2012 to 2021. However, PIS-Cofins revenue was boosted because ICMS and ISS were included in its calculation base. As a result, the tax rate calculated by the court is higher than what would have been reached, according to the CNI, had a more recent reference period been used.

“From a technical standpoint, the need for further discussions is justified by the nature of projection exercises, which are subject to variables involving a range of uncertainties,” the CNI said.

In the confederation’s view, discrepancies in the projections may stem from variables such as the reduction in tax evasion expected from the reform, the discount applied to public-sector purchases, and assumptions about revenue from the Selective Tax and the residual IPI.