Brazil’s lower house of Congress takes major step to enact tax reform

News | July 10, 2024
A general view shows the plenary chamber of deputies during a session to elect the new Brazil’s Lower House president in the plenary of the House of Representatives in Brasilia

BRASILIA (Reuters) – Lawmakers in Brazil’s lower house approved on Wednesday the main text of a bill that would carry out a major tax overhaul, which aims to boost productivity by streamlining a tax system critics blame for burdening businesses with excessive costs.

Lawmakers in the chamber are proceeding to additional votes on amendments to the proposal.

The bill, which still needs a vote in the Senate, includes regulations needed to implement a constitutional tax reform approved last year.

The overhaul would consolidate five existing taxes into a single consumption levy, also known as a value-added tax (VAT), featuring separate federal and regional rates. It would also introduce a tax on products considered harmful to the environment or human health, like cigarettes and alcoholic beverages.

The list of harmful products subject to the tax also includes gambling games and electric vehicles (EVs), with some lawmakers citing the negative environmental impact of discarding EV batteries.

Lower house lawmakers tweaked the original version of the bill by limiting the overall consumption tax to a maximum rate of 26.5%.

The government of President Luiz Inacio Lula da Silva initially sent the implementing tax legislation to Congress in April.

While the approved text did not add beef to a list of essential products that would be eligible for a tax exemption, lawmakers later voted for an amendment to provide it, in line with recent comments by the president endorsing the idea.

(Reporting by Maria Carolina Marcello and Bernardo Caram in Brasilia; Writing by Andre Romani; Editing by David Alire Garcia)