BRAZIL

On October 5, the rapporteur of the Citizenship Committee presented the report to be discussed by the committee regarding the bill that proposes to unify nine sub-national taxes within the framework of the tax reform that the Executive Branch seeks to impose. This document, which summarizes the legislative study, foresees a tax unification and the creation of a Dual Value Added Tax (VAT). This Dual VAT will be composed of two different taxes: one that will feed the national coffers and another one destined to finance the different sub-national jurisdictions (states and municipalities).

 The rapporteur of the bill, Senator Roberto Rocha, justifies in the report that “the Brazilian tax system is chaotic, inefficient and generates inequities. Therefore, it is necessary to move to a simpler model, with few fees, few distortions, which reduces the cost of compliance and litigation.”

Although the intention of the Executive Branch is to have a new tax framework by the end of 2021 or early 2022, the political scenario in Brazil suggests that the treatment of the reform will not meet those expectations. This is due to the fact that in the Brazilian Congress, the ruling party is in the minority. In this scenario, for these reforms to become law, President Jair Bolsonaro would have to negotiate with the opposition parties and, for the moment, these negotiations have not begun.