Congress takes the first step toward tax reform

. Feb 20, 2020
Congress takes the first step toward tax reform Lawmakers sign on the creation of a special committee to discuss the tax reform. Photo: Jonas Pereira/Agência Senado

The advances of the tax reform in Brazil. President Bolsonaro empowers Economy Minister Paulo Guedes. And a senator is shot twice during a police strike in Ceará.

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Tax reform process kicks off in Congress 

Congress took its first step toward passing a tax reform

, with the creation of a special committee on the matter including 25 members each from the House and Senate. <strong>The Brazilian Report</strong>&#8216;s Brasília correspondent Brenno Grillo heard from congressmen that the idea of creating a value-added tax is highly consensual.</p> <p><strong>Simplification. </strong>This new tax would result from the unification of three federal charges—tax on manufactured goods (IPI) and social security contributions PIS and Cofins—as well as the state goods and services tax (ICMS), and municipal services tax (ISS).</p> <p><strong>Yes, but … </strong>State administrations fear they risk handing control of tax collection over to the federal government. Besides not wanting to lose revenue, governors fear that an emboldened Federal Revenue Service could be used politically—leaking compromising information on detractors, which has already happened in the past).</p> <p><strong>Why it matters.</strong> The government has elected the tax reform as the main focus of its economic agenda for 2020.</p> <p><strong>Timetable. </strong>The committee&#8217;s first meeting is scheduled for March 3. The group will have 45 days to vote on a proposal and forward it to the lower house. As a constitutional amendment, the reform must go through two votes in each chamber—having at least two-thirds of support each time.</p> <p><strong>Overburdened.</strong> According to the São Paulo Trade Association’s Tax Clock, Brazilians paid BRL 2.5 trillion in taxes last year. If that money were placed in a pile of 100-dollar bills, it would take 826 twenty-feet-tall containers to store. It is no wonder Brazilians call their tax authority the “Lion,” due to its ferocious pursuit of tax dodgers.</p> <div id="buzzsprout-player-1516360"></div> <script src=";player=small" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <h2>Empowering Paulo Guedes</h2> <p>Amid rumors that Economy Minister Paulo Guedes is unhappy with the government&#8217;s handling of his reform agenda, President Jair Bolsonaro signed on a couple of decree&#8217;s enhancing the powers of his economic tsar. He gave Mr. Guedes more control over the <em>Brasil Mais</em> Program, aimed at helping small- and medium-sized companies to become more effective (an initiative budgeted at BRL 1 billion). </p> <p>The minister was also given tie-breaking powers in matters related to the government&#8217;s public-private-partnership program—a flagship initiative of the administration, which used to be under the umbrella of the Chief of Staff, but was transferred to the Economy Ministry in January.</p> <p><strong>Gesture. </strong>President Bolsonaro empowers Mr. Guedes in a moment when his position is more fragile. The minister has taken some heat over classist remarks about domestic workers and for calling civil servants &#8220;parasites.&#8221;</p> <p><strong>Why it matters.</strong> Mr. Guedes is a sort of buffer protecting the government from more intense criticism from the center-right—which has tolerated the president&#8217;s anti-democratic rants in the name of a liberalizing economic agenda.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Senator shot during police munity, exposing rift between authorities&nbsp;</h2> <p>Since the beginning of the year, the state government of Ceará has been negotiating increased salaries for police officers, proposing a monthly wage of BRL 4,500 (USD 1,030). Policemen want more, and the lack of progress in talks has led to violent protests in seven cities. In two military police battalions, masked men stole ten police cars—in another, more masked protesters deflated the tires of all law enforcement vehicles on site.</p> <p>In the most severe incident, however, Senator Cid Gomes—currently on leave from the Senate to run for mayor in Ceará state capital Fortaleza—was shot twice with .40 caliber ammunition while trying to break a police blockade at one battalion in Sobral, his home town. After giving &#8220;five minutes—and not a second more&#8221; to allow the protesters to scatter, he commandeered a digger and charged at them, when he was shot.</p> <p><strong>Health report. </strong>The senator was hit in the clavicle and his left lung—but is out of danger according to medical reports.</p> <p><strong>National forces.</strong> The federal government will send National Security Force troops to Ceará to assist the local administration. It is the second time in 13 months that a similar move has been carried out. In January 2019, <a href="">criminal factions coordinated attacks</a> across the state and national forces helped local police.</p> <p><strong>Why it matters.</strong> It is hard to overstate the terrible consequences a police strike could entail. In January 2017, <a href="">cops in the state of Espírito Santo walked out</a>—sparking chaos, with mass lootings, assaults, and more than 120 murders in just one week.</p> <p><strong>More tensions. </strong>Ceará is not the only state where disgruntled policemen want higher salaries and better working conditions. There are similar demands in at least seven other states—in Pernambuco and Alagoas, law enforcement has threatened to strike during Carnival. According to a national union that represents 80 percent of Brazil&#8217;s 480,000 policemen, Paraíba and Espírito Santo could soon follow the Ceará crisis.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <p><strong>Live streaming. </strong>Retired Army General Augusto Heleno, the president&#8217;s head of Institutional Security, triggered a new conflict between the government and Congress. During a meeting that was being live-streamed on the internet, he said lawmakers try to &#8220;blackmail&#8221; the president for control over the budget. House Speaker Rodrigo Maia responded by calling Gen. Heleno an opportunistic zealot—highlighting that he didn&#8217;t complain when Congress voted on a wage bump for retired military officers. After controversy was created, the general said his words did not reflect how the president thinks and complained about being exposed by the official sound system of the presidential palace—an odd thing to hear from the man in control of Brazil&#8217;s Intelligence Agency.&nbsp;</p> <p><strong>House.</strong> After losing his office as Citizenship Minister, Osmar Terra is back in the lower house, where he is expected to serve as President Bolsonaro&#8217;s whip. Mr. Terra will be tasked with creating bridges between the government and the moderate right—a relationship that has been rocked by constant head-bumping and statements such as those from General Heleno (above).</p> <p><strong>Petrobras.</strong> Brazil&#8217;s state-controlled oil and gas company reported net profits of BRL 40.1 billion in 2019—an all-time nominal record (not counting for inflation), and a 58-percent bump from the previous year. The results were propelled by the company&#8217;s divestments program, which raised USD 16.3 billion. Meanwhile, Petrobras faces a massive strike from disgruntled workers who protest the shutdown of one of its fertilizer subsidiaries.</p> <p><strong>Startups.</strong> Google will announce today its first worldwide program to accelerate journalism startups—and it will take place exclusively in Brazil. The Google News Initiative Startups Lab will select up to ten projects for a 13-week program that includes mentorship, workshops, and individual follow-up—and a USD 20,000 grant. The project will help companies develop products, marketing strategies, and community-building. Brazil was chosen by Google for being &#8220;an interesting market to understand how innovation can help the news ecosystem.&#8221;</p> <p><strong>Minas Gerais.</strong> Despite being on the cusp of financial collapse, the state of Minas Gerais passed a bill granting a 41-percent raise for several professions. Governor Romeu Zuma only wanted to contemplate law enforcement agents—but lawmakers extended the raise to 70 percent of the state&#8217;s payroll. Prior to his election, Mr. Zuma defended austerity measures—but moves to pander to President Bolsonaro&#8217;s support base. Minas Gerais has a BRL 93-billion debt with the federal government and will post a BRL 13-billion deficit this year.&nbsp;

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