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CNI President Highlights Benefits of Tax Reform for Economic Growth and Reduction of VAT Cumulative Taxation.
The discussion about tax reform has been ongoing in Brazil for 35 years. This is an extremely relevant issue, as Brazilians face the worst consumption tax system in the world, which negatively impacts economic growth and the quality of life of the population.
Despite the recognition of the problems in the tax collection system, facing resistance to tax reform has always been a challenge in the country. For this reason, the definitive approval of Constitutional Amendment Proposal (PEC) No. 45/2019 on December 15 marks a historic moment that deserves to be celebrated by Brazilians. With the proposed changes in the text, Brazil has the possibility of becoming a more prosperous country. This is a significant achievement for Brazil and its population.
Tax Reform in Brazil: Changes and Benefits for Industry
The adoption of the Value Added Tax (VAT) model, already used by over 170 countries, promises to solve numerous problems that negatively affect Brazilian companies. One of these challenges is cumulative taxation. Due to the fact that not all taxes paid by suppliers can be deducted from the taxes owed by purchasing companies, a tax residue is created in production chains.
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Impact on the Industrial Sector
In the case of the industry, this residue results in an increase of 7.4% in prices, according to a study by the National Confederation of Industry (CNI). Additionally, cumulative taxation reduces the competitiveness of Brazilian products in both international and domestic markets. The proposed reform virtually eliminates cumulative taxation by unifying the taxation of goods and services and ensuring the full deduction of taxes paid on purchases made by companies.
Simplification and Deregulation of Investments
Furthermore, the reform will address the issue of the accumulation of tax credits that are currently not reimbursed by the tax authority. This will be avoided by establishing a maximum period for reimbursement and ensuring the refund of credits to companies. The complexity of the current tax system rules causes large companies to spend, on average, 34,000 hours per year calculating and paying taxes, according to consultancy Deloitte. This scenario increases costs and reduces business efficiency, negatively impacting the economic growth of the country.
Reduction of Tax Litigation and Stimulation of Growth
Another major advancement provided by the reform is the reduction of tax litigation, which reached R$ 5.4 trillion in 2019, equivalent to 75% of Brazil’s Gross Domestic Product (GDP). With the implementation of the new tax system, complexity and litigation will be reduced, as only one legislation will be established for VAT.
Positive Forecasts for Economic Growth
Studies from the Federal University of Minas Gerais (UFMG) estimate that, with the reform, Brazilian GDP will have an additional growth of 12% over 15 years, with a 16.6% increase in industrial GDP. Moreover, agriculture and the services sector will also benefit, with additional estimated growth of 10.6% and 10.1%, respectively.
Benefits for the Population and National Development
Therefore, tax reform in Brazil will be a fundamental tool to accelerate economic and social development, contributing to the competitiveness of companies and efficiency in the economy. The change will also benefit other activities, through increased competitiveness and efficiency, as well as through productive chains and greater expansion of industry.
Conclusion
Thus, tax reform will bring better days for everyone and encourage us to continue working towards a stronger industry, a more developed economy, and a country that provides a better life for its population. Monitoring and ensuring the effective implementation of complementary laws will be essential to guarantee the benefits arising from tax reform.
*Ricardo Alban is a businessman and president of CNI.
The article was published in the newspaper Correio Braziliense on 12/21/2023.
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Source: Industry Portal
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