Last week, the government achieved victories after the Congress approved two important projects – tax reform and Carf and two new directors for the Central Bank (BC). After these events, the government tries to solidify its base of alliances in the Federal Chamber and hopes to progress with its economic plans by lowering the country’s basic interest rate.
Tax Reform
On Friday (07/07), the Chamber of Deputies approved the tax reform that unifies five taxes on consumption. This is one among many attempts to overcome a system created in the 1960s and that today fuels judicial conflicts and burdens companies that operate in Brazil, according to experts. Now, the PEC will be voted on in the Senate.
The tax reform has been under discussion in Congress for over 30 years. Legislators have been trying to unite consumption taxes in a Value Added Tax (IVA) since 1988, when the current Constitution was written.
The following tributes will be extinct: IPI (federal), PIS (federal), Cofins (federal), ICMS (state), ISS (municipal); and in place three tributes will be created: CBS (Contribution on Goods and Services), at the federal level; IBS (the Tax on Goods and Services), of state and municipal jurisdiction; Selective tax (on products harmful to health or the environment).
Opposition Divided
Former President Jair Bolsonaro’s (PL) party, the Liberal Party, met a little before voting the reform to discuss its position over the topic. Bolsonaro put pressure against the project and requested that all federal deputies from PL voted against it. However, São Paulo Governor Tarcísio de Freitas (Republicanos), Bolsonaro’s former Infrastructure Minister, supported the project and took part in the meeting to try and convince deputies to approve it. This led to a public disagreement between the two.
PL has the largest number of deputies in the Chamber, with 99. The party threatened to determine a vote against the reform, which would force the unanimous rejection of the proposal, under the risk of punishment. But after the effort made by Tarcísio, the party decided only to guide the vote against. In the end, 20 deputies from PL voted in favor of approving the Tax Reform.
Carf
On Friday (07/07), after completing the vote on the tax reform, the Federal Chamber approved a project that favors the government in the event of ties in judgments at the Tax Appeals Administration Council (CARF), where appeals from Federal Revenue analyzed. Carf judges disputes between taxpayers and the tax authorities.
The project approved reinstates the so-called “quality vote” in the body’s judgments. The mechanism establishes that, in cases of a tie, the president of the collegiate must break the tie, which theoretically favors the Federal Government.
Costs
Amid negotiations with Congress to approve these projects in the economic area, President Lula (PT) released R$ 2.1 billion in resources to Congressmen and set a new record of value made available in exchange of political support. The authorization of transfers took place on Tuesday (04/07) and focused on resources from the Health Ministry, which had been widely criticized by the “Centrão” for the delay in the allocation of the money for the amendments.
The previous record was R$ 1.7 billion, recorded at the end of May, during the vote on the MP (provisional measure) on the Esplanada, when Lula almost suffered the biggest defeat of the government with the imminence of losing the vote on the structure that set up for the ministries of the third term.
Solidifying Support
To solidify further political support in the Federal Chamber, where the Government is still quite weak, , the political group called “Centrão” asked for a series of measures. The group wants to take command of two ministries – Sports and Social Development –, four state companies – Caixa Econômica, Embratur, Correios, Funasa – and an increase of R$ 10 billion in amendments in the second half, in addition to what is already foreseen in the budget. The government will have to negotiate until the next important project to be voted, the Fiscal Framework, which will be evaluated by the Federal Chamber in August, according to the Chamber President Arthur Lira.
Central Bank
On Friday (07/07), Gabriel Galípolo and Ailton Santos were officially approved for becoming Central Bank (BC) directors. They are the first directors appointed by President Lula in his third term. Galípolo and Santos were approved by the Federal Senate on Tuesday (04), after being evaluated by senators. Galípolo will be the new Monetary Policy director, while Santos will head the Supervisory Board. They may become important players to create more pressure to reduce the country’s basic interest rate (Selic) and unlock cheaper credit to make possible the Federal Government’s project to stimulate the local industry.
Improving Relations with the Agribusiness
On Tuesday (27/07), President Lula (PT) announced that the Crop Plan 2023/2024 will total R$ 364.22 billion to finance the agricultural activity of medium and large producers. The announcement of the record value comes amid the government’s efforts to improve the relationship with agribusiness, a sector that is quite close to Jair Bolsonaro (PL) and the main opposition to the current government.
A second part of the plan, at a value of R$ 71.6 billion, aimed at rural credit for family farming, was launched on Wednesday (28/07). The total value will be around R$ 435.8 billion. This represents a 27% increase in relation to the previous package for big producers, and a 34% increase for family producers.
Source: G1 [1], [2], [3], [4]; Folha de SP [1], [2], [3], [4].
