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President of the CNI highlights benefits of tax reform for economic growth and reduction of VAT cumulativeness.
The discussion about tax reform has been constant in Brazil for 35 years. This is an extremely relevant issue, since Brazilians face the worst consumption taxation system in the world, which negatively impacts economic growth and the quality of population's life.
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 the Proposed Amendment to the Constitution (PEC) No. 45/2019 on December 15th marks a historic moment that deserves to be celebrated by Brazilians. With the changes proposed 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 the industry
The adoption of the Value Added Tax (VAT) model, already used by more than 170 countries, promises to solve numerous problems that negatively affect Brazilian companies. One of these challenges is the cumulativeness. Due to the fact that not all taxes paid by suppliers can be deducted from the tax owed by purchasing companies, a tax residue is created in the production chains.
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Impact on the industrial sector
In the case of industry, this residue results in a 7,4% increase in prices, according to a study by the National Confederation of Industry (CNI). Furthermore, cumulativeness reduces the competitiveness of Brazilian products in foreign and domestic markets. The proposed reform practically eliminates cumulativity, unifying the taxation of goods and services and guaranteeing the full deduction of tax paid on purchases made by companies.
Simplification and exemption from investments
Furthermore, the reform will resolve the issue of the accumulation of tax credits that are currently not reimbursed by the Tax Authorities. This will be avoided by determining a maximum period for repayment and guaranteeing the repayment of credits to companies. The complexity of the current rules of the tax system leads large companies to spend, on average, 34 thousand hours per year to calculate and pay taxes, according to consultancy Deloitte. This scenario increases costs and reduces business efficiency, negatively impacting the economic growth the country.
Reducing tax litigation and stimulating growth
Another major advance provided by the reform is the reduction in 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 VAT legislation will be established.
Positive forecasts for economic growth
Studies by the Federal University of Minas Gerais (UFMG) estimate that, with the reform, Brazilian GDP will have an additional growth of 12% in 15 years, with an increase of 16,6% in industrial GDP. In addition, agriculture and the services sector will also benefit, with additional growth estimated at 10,6% and 10,1%, respectively.
Benefits for the population and development of the country
Therefore, tax reform in Brazil will be a fundamental instrument to accelerate economic and social development, contributing to the competitiveness of companies and the efficiency of the economy. The change will also benefit other activities, through increased competitiveness and efficiency, as well as through the production chain and greater expansion of the industry.
Conclusion
Thus, the tax reform will bring better days for everyone and will encourage us to continue working towards a stronger industry, a more developed economy and a country that provides a better life for the population. Monitoring and ensuring the effective implementation of complementary laws will be essential to ensure the benefits arising from tax reform.
*Ricardo Alban is a businessman and president of CNI.
The article was published in the newspaper Mail Braziliense on 21/12/2023.
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Source: Industry Portal
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