Source: O Estado de S. Paulo, 22/08/2007

Only Paraíba, Goiás and Espírito Santo still resist and threaten the unanimity necessary to convert the agreement into a formal agreement, which would be historic within the “scope of the National Council for Farm Policy (Confaz).

The draft agreement provides for the validation of current tax incentives and their phasing out, as of now. She will be submitted to the next Confaz meeting on September 4. If there is no unanimity, the secretaries plan to present this draft as a tax reform proposal for most states, which would facilitate its approval by Congress, where it would need two-thirds of the votes.

In numerical terms, the seats of the three States that, in principle, have reservations to the proposal, total 35 deputies, out of a total of 513 - that is, less than 7%. The problem is that, if the end of the fiscal war depends on the tax reform vote, other issues may cross the debate and, again, delay or prevent changes.

On the other hand, if the government succeeds in closing the agreement already in Confaz, it would remove most of the obstacles to approve the tax reform, allowing the discussion in Congress to focus on the new model of taxation in the country and not on disputing issues of interest. States.

The difficulty in making the agreement viable is that, as a representative body of all states, Confaz can only make decisions by consensus. It is he who is responsible, for example, to authorize the granting of rebates in the payment of taxes, the so-called tax benefits. For this reason, all tax incentive contracts signed by state governments in the past 20 years are subject to judicial challenge, which led the secretaries to start the discussion on how to reach an honorable way out of this fiscal war.

The text agreed yesterday gives a definitive solution to past disputes, by formally validating them. At the same time, it prohibits the granting of new benefits to companies. What has already been granted would continue to be valid for some time yet, but within certain rules.

The benefits of the commercial sector, for example, would need to be revoked immediately. Those in the industrial sector, however, could be fully maintained until the end of 2011 and then progressively reduced until the end of the contracts.

From 2012, according to the draft agreement, the ICMS rate charged by the states that produce the goods would also be reduced from the current 12% (Northeast) and 7% (Southeast) to just 4%. The rest of the tax would now be pocketed by the recipient states, or consumers, as is customary in the developed world.