MP that ‘Recalibra’ IOF will have clash in approval: see points in dispute in Congress

The processing of the Provisional Measure that “recalls” the decree that changed the rates of the financial operations tax (IOF) will have as its background the dispute of sectors of the economy that do not want to see tax increase, while the government presses to raise more resources to comply with the tax framework.

Although the MP has immediate strength, it needs to be approved within 120 days in Congress, which makes room for adjustments and negotiations, and can remove unpopular stretches or change rates.

And even if the publication of the MP occurred after meeting with party leaders, the first signs of resistance are already imposed. This Thursday (12), the leader of the PL in the House, Sostenes Cavalcante (RJ), said that he will verify the possibility that the deputies can approve, at the same time, the overthrow of the two government decrees related to the Financial Operations Tax (IOF).

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For Arnaldo Lima, an economist and leader in relation to investors at Polo Capital, former deputy secretary of economic policy of the Ministry of Finance, there are great challenges for the government to approve a provisional measure that raises the collection by more than $ 20 billion, especially in the face of opposing public demonstrations.

“The ideal would be to build an alignment of incentives capable of expanding the discretionary budget space of the Social and Sectoral Ministries by reducing their mandatory expenses – thus promoting greater efficiency in allocating public resources,” he says. But this would require a major debate in Congress, where parliamentarians would be needed to cut spending that bring political benefits. While this does not happen, the way out is to increase taxes.

Points in dispute

Jeff Patzlaff, a specialist in macroeconomics and investments, states that taxation of roles such as real estate and agribusiness letters (LCIS and LCAs), which fund sectors with wide representation in Congress, should raise the dispute tone in the MP.

“The ruralist bench and the support base of the real estate sector tend to press to maintain full exemption or at least scale this transition. In addition, the end of exemption can discourage investors and make credit increase in these sectors, which brings economic risks,” he says.

Taxation in real estate investment funds (FIIs) and agricultural investment funds (Fiagro) should directly reach more than 2 million CPFs in B3, according to Patzlaff, which will cause strong reaction from both the electoral base and the investor parliamentarians themselves. “It is possible that this taxation will be postponed, diluted or even withdrawal, especially if there is coordinated pressure from the funds and investor industry,” he says.

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The standardization of IOF to 3.5%, while seeking to simplify taxation, ends up burdening the ordinary citizen who travels or makes legal remittances abroad, says Patzlaff. “There are already questions about the tax justice of this measure, especially at a time of high from Selic and high cost of living,” he says.

For him, it is possible for Congress to revise the application to some operations, such as remittances for maintaining students outside the country or retired, as occurred in previous debates.

Consensus points

The increase in the rate from 12% to 18% over GGR (Gross Gaming Revenue) is well regarded by most parliamentarians in Patzlaff’s analysis.

In addition, the tax game tax also has benefits, with low political cost and high collection potential. “It is a popular measure to justify the tax compensation of payroll exemption,” he says.

Finally, IOF on draweed risk operations and short -term external credit should face lower political resistance because they reach large companies and sophisticated players, not the direct consumer, which increases the chance of maintenance.

“Because the payroll exemption is also being discussed in parallel, this MP can end up being a currency of political exchange, with approved or suppressed excerpts due to larger agreements,” he says.