On Tuesday (29/10), the Constitution and Justice Committee (CCJ) of the Federal Senate held the first of 11 public hearings scheduled to debate the Complementary Bill (PLP) 68/2024, which regulates most of the Consumer Tax Reform promoted by Constitutional Amendment (EC) 132/2023. 

‘Today, our tax system is one of the worst in the world,’ said Durigan at the opening of the hearing. ‘All we want is for us to have a new consumption tax system that is among the best in the world,’ he emphasised. The executive secretary commented that the current state of the country's payment system - referring to the technology for the financial settlement of commercial transactions - allows the new model to be introduced quickly.

Durigan emphasised that the Value Added Tax (VAT) to be implemented in the country, although it has the characteristic of being dual, consists of a single tax, whose collection mechanism will be divided between the Union, states and municipalities ‘for the purposes of federative respect’. He emphasised that, as well as having a single law, the Contribution on Goods and Services (CBS), a federal tax, and the Tax on Goods and Services (IBS), which will be managed by the sub-national entities, will be transparent for the taxpayer, unlike the taxes in the current system.  

“It's a revolution”

In his presentation, Secretary Appy gave a history of the reform's regulatory phase, from the drafting of PLPs 68 and 108 (the latter currently before the House of Representatives), based on the reports produced under the Technical Advisory Programme for the Implementation of the Consumption Tax Reform (PAT-RTC), created by the Ministry of Finance. Appy stressed the importance of the participation of representatives from the three federal levels in all instances of the programme, which involved more than 300 professionals and more than 70 institutions.

Appy detailed the general rules of the CBS and the IBS (taxable event, immunities, place of operation and non-cumulativeness, among other points), emphasised the importance of the IBS Steering Committee (at the heart of PLP 108) and listed the gains that the new system will bring to foreign trade, highlighting the exemption of exports. The secretary also explained the transition process to the new rules, which begins with a test rate in 2026, and drew attention to the distributive benefits of the reform. In this regard, he mentioned cashback, a mechanism for returning part of the taxes paid by low-income families on all their purchases. ‘It's a revolution compared to what we have today,’ said Appy. ‘A revolution for a much more efficient system.’

Melina Rocha, an international consultant for the Inter-American Development Bank (IDB) specialising in VAT and a collaborator with the Extraordinary Secretariat for Tax Reform (Sert), spoke at the hearing about the reasons why the Tax Reform underway in Brazil should bring the country into line with the best global tax practices. ‘We're going to be the best VAT model in the world,’ she said. ‘I'm sure that many countries will copy many of the issues included in our reform,’ added, citing in particular the split payment mechanism, whereby taxes will be paid when the transaction is settled.

‘Unlike experiences in other countries, the model proposed in the Tax Reform will combine Brazil's pioneering experience in electronic invoicing with our advanced financial system, which will guarantee the model's success in the country,’ she said.