Tax reform: will it be a reality in 2021? Probably. We hope so

2020 is coming to an end and “nothing” of the tax reform. 2021, will it be a reality?

We started 2020 by analyzing the bills of law (PEC 45 and PEC 110) that could be used as a basis for the tax reform and had everything to be voted by Congress and implemented this year.

The pandemic arrived, surprised everyone and was devastating. Discussions about the PECs were kept at a standstill in Congress. The Federal Government’s plan to divide the federal tax reform into four phases also stalled in the first phase, with the presentation of Bill No. 3887 only, making no further progress. Everything was suspended this year and, once again, the hope of the tax reform was “thrown” to the next year.

2021 will be the year of vaccination. No elections. No World Cup. No excuses. It will be the year to implement a relevant change in our tax system.

The proposed simplification and balance will contribute to the comeback of the country’s growth. It is the alignment of the best practices of encouraging production, trade and services. The tax system must be efficient from a simplicity (i.e., it should not hinder the development of the economy) and efficiency in collection points of view. And, of course, with transparency!

More legal certainty, more transparency, more investments, more jobs, lower costs, less judicialization are references for a good tax reform. Lower taxation on consumption and higher progressive taxation on income. The current tax reform proposals in Congress are based on these pillars.

There is a favorable environment to have an approval with such agenda. The most recent manifestations indicate PEC 45 as being the most mature to be voted in 2021. It would be a strong sign to investors (local and foreign) for the comeback of the economy, since it would simplify and rationalize the taxation on production and the sale of goods and the provision of services.

We need the tax reform. Be it PEC 45, PEC 110 or the phased federal reform, or even a mix of these proposals, which was also considered. We need a Congress committed to discuss and vote the tax reform.

Will 2021 be the year for voting the tax reform? Probably. We hope so!

By Alamy Candido Martins, partner at Candido Martins Advogados
tributario@candidomartins.com.br