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Brazil’s political leaders’ hopes for a thorough tax reform were dashed, and they agreed to reshape the country’s Byzantine fiscal system through a series of sporadic reforms.
The Speaker of the House of Commons, Arthur Lira, said on Tuesday: “The ideal tax reform is a tax reform that Congress can approve.”
Tax reform is Minister of Finance Paulo Guedes’ The Free Economic Agenda aims to improve the competitiveness of Latin America’s largest economies.
However, for more than two years, progress has been a glacier, only the government Publish its recommendations Last July. The proposal has now been incorporated into an agreement reached between Guadix and Senate Chairman Rodrigo Pacheco on Monday night for the lira to make a series of minor changes through Congress.
Lira said: “We must carry out possible tax reforms at this time,” he added, and he hopes that this discussion will continue throughout the year.
As part of the new approach, the Senate will enact a constitutional amendment to allow unification of state and municipal service taxes, while also considering another piece of legislation for corporate tax refinancing. At the same time, the House of Commons will discuss the enactment of federal goods and services tax legislation.
This new approach may disappoint investors who want Guidis to quickly overhaul what has long been considered one of the most complex tax systems in the world.
According to data from the World Bank, a Brazilian medium-sized company needs approximately 2,000 hours to prepare and pay taxes, the most in the world. In comparison, an American company spent 175 hours, while a British company spent 105 hours. According to data from the Brazilian Institute of Planning and Taxation, in the past 30 years, an average of 35 tax regulations were changed every day, or 1.45 changes every hour.
“In my opinion, their idea is to develop strategies to approve possible things, rather than waiting for more difficult things. The strategy of splitting into different discussions is to make it easier [to pass Congress]”Douglas Mota, a tax partner at the law firm Demarest, said.
Lucas Galvão, a tax expert at Barros Carvalho Advogados, expressed concern that the government has not yet made a proposal to revise income and industrial product taxes. He said: “We still don’t know what these changes will be.”
Investors watching Brazil hope that the legislation will be passed as soon as possible because they realize that with next year’s federal election, sensitive reforms will actually become impossible.
Jens Nystedt, senior portfolio manager at Emso Asset Management, said: “It does not really attract investors to split it up, because its management capabilities and the government’s market-friendly nature are increasingly being questioned.”
“It is certain that they have not had a few years, even if they decide to adopt a piecemeal approach, they must speed up the timetable if they are to successfully address the growing investor concerns.”
Additional reporting from Place, North Carolina
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