The fear is that the size of the rate, estimated at 11.3% by the Federal Court of Auditors for 2027, represents an increase in the tax burden, mainly in the services sector — less benefited from the use of tax credits from previous chains.
Added to the state and municipal tax, with full collection scheduled for 2033, analysts forecast that the future tax on consumption will reach 30%. If confirmed, it would be higher than the rate in all developed countries.
The TCU proposal will be forwarded to the National Congress, which may or may not agree. It will be up to the Senate to set, by December 15th, the final value of the rate to be charged from 2027 onwards.
At the time, the proposal did not include a tax on consumption by states and municipalities so that it would not be necessary to change the Federal Constitution.
It would be enough to approve a bill on the subject, which depends on less support from deputies and senators. The reform of the state and municipal ICMS and ISS would be a second step.
The tax reform approved by Congress during the Lula government had as its main references the PEC 45, drawn up based on studies by Bernard Appy, then at the Fiscal Citizenship Center (CCiF), and the replacement presented by deputy Aguinaldo Ribeiro in 2023.
The Lula government did not forward its own consumption reform proposal to Congress, but actively participated in the negotiations through the Ministry of Finance team and defended several points incorporated into the final text.
One of the differences between the texts is that the tax reform proposal on consumption by Guedes, a defender of the autonomy of federative entities, included only a federal tax, leaving out taxes from states and municipalities.
The reform approved during the Lula government was based on Bernard Appy's (CCiF) model, but adapted the original project: instead of a single tax (IBS) managed by everyone, Congress opted for Dual VAT, dividing it into CBS (federal) and IBS (state/municipal) to preserve the autonomy of federative entities.
Both proposals (Lula and Guedes) shared the concept of VAT and the institution of a selective tax, also called 'sin tax'. Appy's original project, however, provided for the replacement of five taxes (PIS, Cofins, IPI, ICMS and ISS) with a single tax, IBS.
The two proposals had in common the replacement of PIS and Cofins with a tax along the lines of a value-added tax (VAT), in addition to the intention of establishing a selective tax on products considered harmful to health or the environment.
Possible rate reduction
Under pressure from the productive sector of the economy, the heads of the economic teams also informed that they would seek to reduce the rate in the future.
"We haven't stabilized the rate yet. We made a first proposal. If this turns out to be exaggerated, we'll lower it", stated Guedes at that time.
This week, the Minister of Finance, Dario Durigan, stated that the government will seek to discuss with Congress, during the year 2027, a review of the tax benefits provided for in the tax reform on consumption.
The objective, according to him, is to reduce some incentives approved for products and sectors of society to lower, in the future, the federal government's Contribution on Goods and Services (CBS) rate.
Understand: the tax reform aims to keep the tax burden on consumption stable. Thus, as Congress approved a broad set of benefits for products and sectors with exemptions or reduced rates, the necessary rate for other segments of the economy became higher.
"It is a first number that maintains the tax burden as approved by Congress and will give us the conditions, once again, to have a clear debate, already lower than what the previous government proposed. So that we can continue reviewing the exceptions, the favored regimes, so that we have a lower tax rate over time", the minister told journalists.
Common points and differences
The two proposals included maintaining the current level of the tax burden on consumption, something that penalizes the poorest population due to the high degree of “regressiveness”, that is, proportionally more is collected from those who earn less.
Revenue figures show that taxes on goods and services, that is, indirect taxes embedded in prices, are much higher than in developed countries, while taxes on income and assets (which affect the richest) have a lower weight in Brazil.
Both proposals also included the non-cumulative value-added tax model, in force in the rest of the world. This means that, throughout the production chain, tax is charged at each stage, but taxpayers can deduct the tax previously paid.
The two projects also promised to simplify the tax system, reduce company costs, provide greater transparency, combat tax evasion, relieve exports and generate more investment in the economy.
The reform approved by the Lula government provides for VAT to be charged at the destination, where the goods and services are consumed, and no longer at the origin. The transition will be gradual and will take decades.
As the Bolsonaro government's proposal was restricted to federal taxes, without including state and municipal taxes, it did not address this change.
Differentiated treatments
The two reforms also provided for different treatment for sectors of society, or specific products. See below:
Simples Nacional: maintenance of the benefit was proposed during the Bolsonaro government, and was also foreseen in the tax reform approved under President Lula. Companies will be able to choose whether to remain in the regime, or opt for the new (hybrid) model that allows tax credits to be deducted. The deadline is December 20th.
Manaus Free Zone: Bolsonaro government proposed that tax incentives be maintained, with the creation of specific mechanisms to preserve competitive advantages. Free Zone continued to benefit from the reform approved by the current government.
Single-phase fuel regime: it was proposed by Paulo Guedes and maintained in the current reform. Collection continues to be concentrated in specific stages of the chain, precisely for operational and tax control reasons.
Agricultural regime: Guedes' proposal provided for the maintenance of the agricultural regime to ensure equivalent conditions of competition for small rural producers. The approved reform also maintained differentiated treatment for the agricultural sector and cooperatives.
Financial institutions: Guedes' proposal provided for a specific CBS of 5.8% for banks, insurance companies and health plans. In the approved reform, the financial sector also received specific tax treatment, although different from the model proposed by the Bolsonaro government.
Public transport: Guedes' proposal provided for a favored regime. In the approved text of the tax reform, public transport is among the activities benefited.
Basic food basket: Guedes' proposal provided for an exemption for income obtained from the sale of basic food basket products. The original proposal for PEC 45 did not provide for exemption from the basic food basket and defended a uniform rate, compensating the poorest through the return of taxes. The benefit for the basic food basket was incorporated later, during the reform's progress in Congress.
Charitable entities, religious temples, political parties and trade unions: Guedes' proposal provided that the CBS would not affect social assistance charities, religious temples, political parties, unions, federations and confederations. The approved reform preserved the constitutional immunities and tax treatments provided for these entities.
Sale of residential properties to individuals: Guedes' proposal provided for exemption from CBS in the sale of residential properties to individuals. The approved reform gave the real estate sector a specific regime, with adjustment reducers and its own taxation rules.
Scope of tax reform
Paulo Guedes' proposal cited changes in other taxation bases, such as income, payroll and also the selective tax.
He advocated a reduction in corporate taxation and dividend taxation for less pejotization and more investment. The text was approved by the Chamber of Deputies, but did not go ahead.
Furthermore, the presentation released in 2020 by the Bolsonaro government's economic team also cited the reduction of payroll taxes to reduce the cost of formal work. He didn't say how this would be done, but Guedes even defended the creation of a tax on financial transactions.
The PT government, in turn, fulfilled President Lula's promise to expand the income tax exemption range to up to R$5,000.
The CBS rate estimate of 11.3% for 2027 generated criticism from the production sector; value is below the 12% projected by the previous management.
