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Companies Fear That MP 1202 Will Increase Hiring Costs and Impair Competitiveness. Fiscal Adjustment Necessary for Economic Development.
The Provisional Measure 1202 has been the target of criticism from business entities, which claim that the measure increases the costs of employing in the country, harming the competitiveness of Brazilian products and services both in the international market and in the domestic market. MP 1202/2023 has significant impacts on various sectors of the economy, leading to widespread dissatisfaction among representative entities of agriculture, commerce, industry, services, and transportation.
In addition to affecting the productive sector of Brazilian products and services, the Provisional Measure 1202 also raises concerns related to the re-levy on payroll. The re-levy on payroll is a sensitive issue for business entities, which fear the effects that the measure will have on employment and companies’ investment capacity.
Business Entities Reject MP 1202
In a statement, the Confederation of Agriculture and Livestock of Brazil (CNA), National Confederation of Commerce of Goods, Services, and Tourism (CNC), National Confederation of Industry (CNI) and National Confederation of Transportation (CNT) express their dissatisfaction with MP 1202. The measure imposes a re-levy on payroll for 17 sectors of the economy, limits the use of tax credits resulting from definitive court decisions for the payment of federal taxes, and revises the Emergency Program for the Recovery of the Events Sector (Perse).
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Economic Impact of MP 1202
The president of CNI, Ricardo Alban, recalls that in the past, the preservation of jobs was always advocated. ‘It is obvious that the re-levy on payroll will result in increased caution on the part of employers. When any sector of the economy faces an additional 20% in their burdens, what will they do? The first step is to stop investing and then reduce until they understand the impact that this new and unexpected cost will have on their performance because the sector will lose competitiveness‘, states the businessman.
Repercussions of MP 1202 in Industry and Commerce
According to the Confederations, MP 1202 further undermines the competitiveness of industry and commerce, which face unequal competition with imports, especially from international e-commerce, which does not pay the same taxes as the productive sector domestically. The MP is considered misguided for increasing the tax burden on the productive sector, which is the main generator of wealth and jobs leading to sustainable economic and social development.
MP 1202 Harms the Productive Sector
The productive sector, represented by business entities from agriculture, commerce, industry, services, and transportation, received with surprise and dissatisfaction the measures of increased taxation announced at the end of 2023 and the manner in which they were implemented, through MP 1202, without prior dialogue with the entities and in opposition to recently taken positions by the National Congress.
Impact of MP 1202 on the Productive Sector
MP 1202 re-levies payroll for 17 sectors of the economy, limits the use of tax credits resulting from definitive court decisions for payment of federal taxes, and revises the Emergency Program for the Recovery of the Events Sector (Perse). All these measures increase the tax burden on the productive sector, which is the main and fundamental generator of wealth and jobs leading to sustainable economic and social development.
MP 1202 and the Decision of the National Congress
In addition to being misguided from an economic standpoint, MP 1202 nullifies recent decisions of the National Congress, which twice in 2023 decided to maintain the payroll exemption, having overturned the veto of the Presidency of the Republic, in an unequivocal demonstration of political will.
Economic Challenges Amidst MP 1202
The re-levy on payroll increases the cost of employment in Brazil and further harms the competitiveness of industry and commerce, which already face unequal competition with imports, especially from international e-commerce, which does not pay the same taxes as the domestic productive sector. A situation that already imposes on us the need to legally challenge such a mistake. And if reversed, it will turn into a great opportunity to simultaneously increase federal revenue and ensure tax justice between national production and imports.
Fiscal Adjustment and Balance of Public Accounts
The productive sector understands the importance of seeking to adjust public accounts so that the economy can grow sustainably. However, what we have observed is the increase of public sector expenses and the search for fiscal balance with the continuous increase of revenue. The burden of adjustment cannot fall solely on the productive sector. The public sector needs to contribute by reducing and making its expenditures more efficient. We hope that the government itself reconsiders sending MP 1202. And if that is not the understanding, we hope that the president of the National Congress can return the MP.
The entities representing the productive sector believe that dialogue is the only way for public policies to achieve their objectives. Economic growth and fiscal balance are goals for the entire nation. To achieve them, everyone’s participation is necessary in seeking convergence and understanding. The productive sector is committed to the economic and social development of Brazil.
Source: Industry Portal
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