Thu. Feb 29th, 2024

In Brazil, Congress approves tax reform magnitude

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The reform provides for a reduction in tax rates in the health and education sectors.

Agence France-Presse

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The Brazilian Congress approved a major tax reform on Friday, a political victory for left-wing President Luiz Inacio Lula da Silva and a turning point for Latin America's largest economy.

This is the first reform of the consumption tax system in Brazil since the beginning of the military dictatorship (1964-1985).

The Chamber of Deputies approved this proposed amendment to the Constitution in two separate votes, with 365 votes in favor – 308 were needed – in the final round. This was the second review of this text after the changes made by the Senate in November.

It is the most important of reforms, because it organizes the entire productive system, declared the Minister of Finance, Fernando Haddad, after the vote.

It aligns Brazil with the most modern countries in the world, he added.

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For his part, the President of Congress, Arthur Lira, described this day as historic, saying that this reform aims to reduce bureaucracy and make tax calculation more transparent.

Such a reform, which the government describes as historic, was already desired by previous executives, and in particular by the former head of state. #x27;far right Jair Bolsonaro (2019-2022). But each time she came up against the lack of consensus.

It combines five taxes into one, the Value Added Tax (VAT) which will be divided into a federal tax and a state tax. It also reduces tax rates in sectors such as health, education and basic foodstuffs, and includes incentives for manufacturers of electric vehicles and fuel-efficient vehicles. biofuels.

The bill provides for a transition period until 2033, when the new system will be put in place. The amount of VAT will be determined later in a law, but it is expected to be around 27%, one of the highest rates in the world, according to the latest estimates from the Ministry of Finance.

< p class="StyledBodyHtmlParagraph-sc-48221190-4 hnvfyV">The government has said that this figure, and the resulting increase in the tax burden on the services sector, will be mitigated by compensation.

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