Is Brazil the country with the highest tax in the world? Understand the impacts of the tax reform that makes the country surpass Hungary and have 28% VAT.
Is Brazil the country with the highest tax in the world? The regulation of the tax reform, sanctioned last Wednesday (16), foresees the creation of a Value Added Tax (VAT) with an estimated rate of around 28% in Brazil. This projection was presented by Bernard Appy, extraordinary secretary of the reform, and positions the country as one of those with the highest average tax burdens on consumption in the world. The objective of the VAT is to simplify the national tax structure, unifying taxes such as ICMS and ISS. However, experts warn that this high rate may impact the final price of goods and services, generating debates about its viability and economic competitiveness.
Tax Reform also receives tax rate lock
With the rate, the country could surpass the tax rate applied in Hungary (27%), thus taking the “pole position" on the podium of the highest taxes in the world. However, during its first passage through the Chamber of Deputies, the regulatory text gained a new mechanism that should prevent the scenario where Brazil is the country with the highest tax in the world.
This is the tax rate lock, a device that serves to do exactly what the name suggests: prevent the tax from the general tax reform from exceeding a certain level. In this case, the level is 26,5%.
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The average taxpayer, when faced with this number, is usually shocked by the expected burden of taxes after the reform. However, the purpose of the tax reform and the tax break is to ensure that the current tax burden does not increase or decrease.
O Brazil is the country with the highest tax in the world and, during the processing of the tax reform regulation project, a series of exceptions and special regimes were applied to the collection of VAT. According to Appy, the inclusion of exceptions during the Senate's processing was the most important factor in increasing the average tax burden from 26,5% to the estimated 28%.
Understand the text sanctioned for tax reform
At the time of the process, the rapporteur, Senator Eduardo Braga (MDB-AM), sought to embrace, partially or fully, about 600 of the changes proposed by legislators.
The secretary states that the changes that had the greatest impact on the tax rate were rejected when the text returned to the Chamber of Deputies. However, he acknowledges that the final tax should be slightly higher than estimated during the first passage of the bill through the hands of the Chamber of Deputies. federal deputies.
It is worth mentioning that Brazil is the country with the highest taxes in the world. Thus, President Lula sanctioned, with 17 vetoes, the complementary bill that regulates the tax reform. The proposal establishes rules on the new taxes created by the reform, the Contribution on Goods and Services (CBS), which is federal, and the Tax on Goods and Services (IBS), which is a state and municipal tax.
The CBS will gradually replace PIS, Cofins and IPI, while the IBS will be charged in place of ICMS and ISS. The bill also defines details about the Selective Tax (IS), known as the “sin tax”, which is levied on items considered harmful to health and the environment.
Understand the impacts of Tax Reform
Brazil is the country with the highest taxes in the world, and for companies, adapting to the new rules will be like entering a game of chess. According to experts, tax planning will become one of the biggest competitive advantages. Thus, there is a huge race for efficiency, and the entrepreneur who masters the data, understands tax residues and anticipates price adjustments will come out on top.
Consumers will not be left unscathed either. The promise of fairer prices in the production chain may come up against cost transfers in the short term. The issue of increasing working capital, for example, is an underestimated challenge. Companies will need liquidity to adapt, and this may have an impact on the final price of products.