On August 20, the Special Committee of Deputies continued with its work on the tax reform proposal filed by Baleia Rossi (Movimento Democrático Brasileiro – allied with the ruling party). The idea behind the proposal is to simplify the current tax system in order to reduce company costs and avoid the cumulative levy of five taxes currently affecting consumption. In addition, on August 19, the Senate began to analyze its own tax reform bill. Pending the Government’s proposal, which has not yet been introduced to Congress, the presidents of both chambers agreed to work together to move forward on a consensual proposal.

The Special Committee of Deputies passed more than 30 motions for public hearings in the different states of Brazil with the objective of extending the debate on the constitutional amendment throughout the country. The idea is to invite representatives from special agencies such as the Federal Economic Council and the Institute of Fiscal Justice to these debates. In addition, the deputies welcomed Bernard Appy, an economist involved in drawing up the bill under study, who explained that the reform as a whole will produce a 5% increase in income for the lowest-income population as it impacts product prices.

Meanwhile, senators listened to economist and former deputy Luiz Carlos Hauly, rapporteur of the 2004 reform bill, at a hearing which served as input for the elaboration of the proposal under study. Hauly explained the main points of the current bill including eliminating nine taxes by levying Value Added Tax, ensuring that neither medicines nor food are taxed, in addition to a selective federal tax. The idea of the latter is that it affects specific products such as fuels, cigarettes, electricity and telecommunications services.

It is important to note that there are currently two tax reform bills pending in Congress. Both the one in the Chamber of Deputies (the most advanced in its process) and the one in the Senate seek to simplify the current tax system. Pending the Government’s presentation of its tax reform proposal to Congress, Rodrigo Maia, president of the Chamber of Deputies, announced today that there is an intention to annex the Executive’s bill to the Deputies’ version, which is at the moment the most advanced in its legislative process.