Haddad advances on Perse and exempts municipalities again

The Minister of Finance, Fernando Haddad, formalized new proposals to try to end Perse (Emergency Program for the Resumption of the Events Sector) and the tax exemption for municipalities with a smaller population.

In the case of the aid program for the events sector, created to give breathing space to companies affected by the Covid-19 pandemic, the economic team’s idea is to cut the number of activities benefiting from 44 to 12 and exclude companies taxed by real profit from the program. (turnover greater than 78 million reais).

In the current situation, the companies included in the measure, extended by Congress until 2026, have zero rates for PIS/Pasep, Cofins, CSLL (Social Contribution on Net Profit) and IRPJ (Corporate Income Tax). The proposal includes a gradual reinstatement of these taxes until the end of the validity of the extension.

In the case of municipalities with up to 156.2 thousand inhabitants that benefited from a reduction in social security contributions, the solution presented by the Ministry of Finance is to limit the discount to cities with up to 50 thousand inhabitants and 3,895 reais in net income per capita. This would mean that the benefit would serve around 2,500 cities, which is less than half of the 5,366 municipalities foreseen in the proposal approved by the National Congress.

The re-encumbrance strategy would be the same as that used in the case of Perse, with the rates increasing gradually until 2026.

The texts do not point to the tax impact of the measures on revenue, but, recently, the Federal Revenue argued that the measure had a fiscal cost of 10 billion reais, in 2022, and 13.1 billion reais, last year.

These numbers were contested by industry associations, based on a survey carried out by Tendências Consultoria at the request of companies. According to them, based on official public research, including the invoice base with data carried out until June 2023, the effective cost of the program would be around 6.5 billion reais per year.

The government’s proposals were filed this Wednesday, 28th, and should begin to be considered in the week of April 8th.