By Luiz Carlos Benner

On July 7, 2023, the Chamber of Deputies approved the Replacement of the Proposed Constitutional Amendment (PEC) No. 45/2019, which provides for the Tax Reform on consumption.

The PEC will now proceed to the Federal Senate. A Working Group composed of 9 senators will assess the text initially and then send it to the Senate Plenary. Approval will depend on three-fifths, representing 49 senators.

The main changes are the extinction of 5 taxes (ICMS, IPI, PIS, Cofins and ISS) and the creation of three new taxes: Federal Contribution on Goods and Services (CBS), State and Municipal Tax on Goods and Services (IBS) and Federal Selective Tax (IS).

The record approval of the proposal by the Chamber of Deputies brought a series of concerns to businessmen in general. There is still a long way to go before the reform is implemented. As if it were not enough to need approval by the Senate, many important points still need to be defined. One of them is precisely the definition of tax rates. In addition, it will be necessary for the government itself to make its own adjustments in order to supervise and allow taxpayers to deliver accessory obligations.

What has already been defined is the transition period, which will begin in 2026 and be completed in 2033, when the new consumption tax system will be fully adopted. The ICMS, for example, will have its change started in 2029 and the benefits of ICMS and ISS will have their total extinction forecast in 2032.

Although the Government is sending a message that there will be a reduction in the tax burden, what we have seen in recent years has been an increase in the tax burden in general and, even if some sectors end up having some type of reduction in their tax burden, others, such as example the service sector, will certainly suffer an increase in the load. Despite many uncertainties, this time, apparently the reform will get off the ground. It remains to be seen who will be the great beneficiary.

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