Good morning! Today, we talk about the new tax reform draft. Explicit displays of horse-trading in Brasília. And a warning for Brazilian farmers.
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New tax reform draft makes simplification less simple
After much ado, Senator Eduardo Braga finally presented his draft of the tax reform bill on Wednesday afternoon. It makes several changes to the text approved by the House in July and includes more economic sectors in special tax regimes.
Why it matters. The more exceptions to the general rule there are, the higher the standard value-added tax rate will have to be to accommodate them all. While the tax system that would emerge if Mr. Braga’s draft is approved as is (and this is a big if) is better than what we currently have in Brazil, the new text further veers the tax reform from its original ideal.
Into the weeds. Boiled down, the tax reform plan is to consolidate Brazil’s five multi-level consumption taxes into two VATs: one at the federal level (CBS) and one for states and...