Lula praises Congress efforts to pass tax reform
Brazilian President Luiz Inácio Lula da Silva highlighted the role of the National Congress in approving the tax reform, which simplifies the country’s tax system. As an amendment to the constitution, the reform was enacted at a Congress session attended by the presidents of all three branches of power on Wednesday (Dec. 20).
In his speech, President Lula praised the role of Congress. “Remember that, whether you were for or against it, you helped ensure that this country, for the first time in its democratic regime, approved a tax reform to the satisfaction of the Brazilian nation. To be sure, it won’t solve all the problems, but it is proof that, whenever this National Congress had to show commitment to the Brazilian people, it did not fail to do so. When it was challenged, it delivered,” said the president, who also mentioned his former days as a parliamentarian. The president served as federal representative from 1987 to 1991.
He also praised the role of the finance minister in putting the plan together. Minister Fernando Haddad, he noted, was “intelligent enough to draft a proposal few people believed could pass.”
Minister Haddad, in turn, urged the Supreme Court to make sure the reform, once approved, is effectively enforced. “From now on, this amendment has a guardian, namely the Supreme Court. We are counting on the Supreme Court to ensure this amendment is welcomed as generously as it deserves, so that we can cement this reform over the years,” he declared.
The minister also underscored the constructive nature of the proposal. “It is perfect because it was built under a democracy. Everyone was heard; everyone participated. It is perfect because it contains a clause stipulating regular reviews. It is humble and acknowledges its place in history and the need for further improvement,” he went on to argue.
A new framework
After 30 years under debate, the tax reform is expected to make taxation simpler for Brazilians when it comes to buying products and paying for services.
The main novelty will be the merging of four taxes into the Tax on Added Value (VAT in the original Portuguese acronym), administered partly by the federal government and partly by the states and municipalities.
The new tax on goods and services will come into force in 2026 and last until 2033. The transition to collecting the tax at its final destination will begin in 2029, and should take 50 years before its completion, slated for 2078.
With a long list of exceptions and special rates, the new system should have varying impacts on each sector of the economy. Also, for the first time in history, measures will be taken to introduce progressive taxation for certain types of assets—like vehicles—and for the transfer of inheritance.
Over the next year, Congress will have to vote on complementary laws to regulate the overhaul. Bills will be submitted in the first weeks of 2024, the minister pointed out.
Also next year, the government may begin to reform income taxes, with changes such as the taxation of dividends.
