MNI EXCLUSIVE: Brazil Tax Reform Revamp Likely This Month

Brazilian President Jair Bolsonaro is set to relent to pressure from Congress to include a new welfare program in a revamped version of his stalled tax reform package before the end of the month, government sources told MNI.

The objective is to try to convince parliamentarians to link politically sensitive subject like possible tax hikes with an issue that has widespread support in Congress -- the payment of benefits to the poorest.

"If we add a package of kindness to a subject that is more difficult to understand, which is tax reform, we may have more support," an economic team official told MNI.

While Brazil's Ministry of Economy was expected to send four tax bills to Congress over different periods, this change of strategy means only two bills will be submitted within a shorter time. One bill will propose folding seven existing different types of tax into a single rate, while the other will create a new welfare program.

LACK OF TRANSPARENCY

So far, parliamentarians have complained about Bolsonaro's lack of participation in the debate. Some are skeptical about the date of submission of their new proposal.

"The government lacks transparency in this discussion. If I don't play fair, Congress will approve one of the proposals that we are already debating," said Senator Simone Tebet from the center-right party, MDB. There are two proposals for constitutional amendments in the House.

At the end of July, the government presented a project that proposed the unification of the collection of two federal taxes, the PIS (social integration program) and Cofins (social security contribution). Together, they would create the Social Contribution on Transactions with Goods and Services (CBS). Its rate would be 12%.

POLITICAL OPPOSITION

Any new proposal will still face political opposition.

The president of the Chamber, Rodrigo Maia, from the right-wing Democratas, has already declared that any tax readjustment will not be approved in the legislature.

The leading figure on tax issues, Deputy Aguinaldo Ribeiro, from the right-wing Progressistas, has a similar opinion. "Minister Paulo Guedes says that Brazil is a tax asylum, but the proposals presented so far are medieval," Ribeiro said.