Brazil's Lower House Approves Major Tax Overhaul Bill | Investing News
In a groundbreaking move, lawmakers in Brazil's lower house have approved the main text of a bill for a major tax overhaul. This reform aims to enhance productivity by simplifying a tax system that has been criticized for imposing excessive costs on businesses.
The bill, which still needs to be voted on in the Senate, includes provisions necessary to implement a constitutional tax reform that was passed last year. One of the key changes proposed is the consolidation of five existing taxes into a single consumption levy, similar to a value-added tax (VAT), with separate federal and regional rates. Additionally, the reform introduces a tax on products deemed harmful to the environment or human health, such as cigarettes, alcoholic beverages, gambling games, and electric vehicles (EVs).
Notably, lower house lawmakers have modified the original version of the bill by capping the overall consumption tax rate at a maximum of 26.5%. This move is seen as a way to balance the need for revenue generation with the goal of boosting economic growth.
The government of President Luiz Inacio Lula da Silva initially presented the tax legislation to Congress in April, signaling a commitment to modernize the country's tax system. While the approved text did not include beef as an essential product eligible for tax exemption, lawmakers later voted to amend the bill to accommodate this change, aligning with recent statements by the president supporting the idea.
This tax overhaul has the potential to significantly impact businesses and consumers in Brazil. By simplifying the tax system and introducing new measures to promote environmental and public health, the reform could lead to a more efficient and sustainable economy. Investors and market participants should closely monitor further developments in this legislative process, as they could have far-reaching implications for the financial landscape in Brazil.