On the same day that the National Congress enacted Law 14,784, which extends the validity of the payroll tax exemption policy until December 31, 2027, the Minister of Finance, Fernando Haddad, announced a package of fiscal measures that he will send to the Congress issued a provisional measure (MP) establishing the gradual reinstatement of the payroll of the 17 sectors whose companies had the option of adhering to the Social Security Contribution on Gross Revenue (CPRB).
In response to this unexpected announcement, which will still be detailed in the MP, ABES and sectoral entities released a manifest in which they reiterate the need for a “dialogue that seeks, in a broad and inclusive way, the best proposal for Brazil in terms of generating formal jobs, competitiveness of the economy and public revenue“.
O statement further reiterates that “The 17 sectors currently employ, with a formal contract, more than 9 million workers, having created more than 300 thousand jobs in 2023 alone (until August). These are highly labor-intensive sectors, whose payrolls have a high weight in their cost composition. The payroll tax reduction policy reduces this cost, undoubtedly being a mechanism for these sectors to employ more and, importantly, in a formal manner”.
Consequently, this policy generates more revenue for Social Security, more Income Tax, more collection for FGTS and less social costs such as unemployment benefit, for example. In 2022, it is estimated that the additional revenue generated by this policy was in the order of R$22 billion, including R$2.4 billion additional collection of COFINS-Importation at an additional rate of 1% stipulated by the tax relief law itself.
In short, payroll tax relief promotes a virtuous circle: more formal jobs, greater competitiveness of companies, greater total revenue, greater dynamism of the economy, more formal income for workers, greater social inclusion.
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Furthermore, the proposals mentioned in the press conference today by the Minister of Finance are not clear and signal important changes that were not discussed with Congress, with the business sector and not with worker representatives. These are proposals that should not be imposed on society without discussion broad and comprehensive prior notice, through a Provisional Measure.
For these reasons, we strongly emphasize that the position of the 17 sectors is that any alternative proposals on payroll taxation be forwarded through a Bill or discussed, as expected, in the next stage of tax reform (taxation on income and employment) which must be andforwarded by the government to Congress within 90 days after the promulgation of the first stage (consumption taxation). This will indeed allow for a productive debate on the several alternatives and reaching the best solution for Brazil in the long term.
The 17 sectors included in the payroll tax exemption policy ratify their commitment to remain fully available, as they always have been, to dialogue with the Ministry of Finance, Congress and worker representatives, debating options, numbers and data that help in the search of the best solutions for Brazil. We believe that Brazil does need to seek broad solutions that reduce payroll costs, which are extremely high in Brazil. This high cost discourages the creation of formal jobs and reduces the country's competitiveness in the world economy.
But it is imperative that this be done through an in-depth discussion with society and with respect to a firm decision by Congress.
Machete download the full manifesto on here.
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