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Political leaders Brazil they have shattered the hopes of a massive tax reform by agreeing to rework the country through some of the changes made to the Byzantine fiscal regime in part.
“The ideal tax reform is one that Congress can approve at this time,” Arthur Lira, speaker of the lower house of parliament, said Tuesday.
It is a tax reform Finance Minister Paulo Guedes’ a liberal economic agenda aimed at increasing the competitiveness of Latin America’s largest economy.
For more than two years, however, progress has been glacial because the government has only had them making his proposal known in July last year. The proposal was included in an agreement reached Monday night between Senate President Lira, Guedes and Rodrigo Pacheco to pass several minor changes in Congress.
“We need to make tax reform possible at the moment,” Lira said, adding that discussions are expected throughout the year.
Under the new approach, the Senate will develop a constitutional amendment to allow for the unification of taxes on state and municipal services, while at the same time examining separate legislation on corporate tax refinancing. The lower house, meanwhile, will discuss legislation to create a tax on state-owned goods and services.
The new approach is likely to be an investor who expected Guedes to expect a quick review of the tax system that has long been considered one of the most complicated in the world.
A Brazilian company in the world needs about 2,000 hours to prepare and pay taxes, according to World Bank data, the most in the world. In contrast, a US company needs 175 hours and a UK team 105 hours. Over the past 30 years, an average of 35 tax rules have been changed daily, or 1.45 per hour, according to the Brazilian Institute of Planning and Taxes.
“I think their idea is to develop a strategy to accept everything that is possible and not wait for what is more difficult. It is to facilitate a differentiating strategy in different discussions [to pass Congress]”Said tax partner Douglas Mota, the law firm of Demarest.
Lucas Galvão, a tax expert at Barros Carvalho Advogados, has expressed concern that the government has not yet submitted a proposal to change taxes on income and industrial property. “We still don’t know what those changes will be,” he said.
Investors who are watching Brazil want to pass legislation as soon as possible, recognizing that sensitive reforms with federal elections next year will be nearly impossible.
“Distribution is not really an attraction for investors because it calls into question the governance and the nature of the administration-friendly market,” said Jens Nystedt, CEO of Emso Asset Management.
“One thing is for sure, they don’t have a year and even if they decide to raise it in installments, they have to have a fast time schedule if they want to properly address their concerns for investors.”
Additional news from Carolina Pulice
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