Tax Reform: ISS can be replaced by new tax


Source: LegisCenter, 25/09/2007

The information was provided by the Economic Policy secretary of the Ministry of Finance, Bernard Appy, who met with state finance secretaries and representatives of municipal entities.

According to Agência Brasil, the IVV will have a rate of 1,5% and city halls may reduce it within a margin of 1%. The Federal Government assumed the responsibility to compensate municipalities that have a lower IVV collection than that achieved with ISS, with transfers in the same amount lost, with Federal VAT.

Appy Reform also stated that, with the reform, the Brazilian tax system will only have the Additional Value Tax (IVA), with two legislations, one federal and the other state.

The secretary said that the objective is to replace the four federal taxes (Tax on Industrialized Products, Social Integration Program, Contribution for the Financing of Social Security and Contribution for Intervention in the Economic Domain) with just one: federal VAT. The 27 state legislations on ICMS will be replaced by a law that will apply to all federates, state VAT.

Appy explained that the state VAT will meet the demands for unification of the ICMS legislation made by the finance secretaries to solve problems of the fiscal war and the accumulation of credits.

Other taxes Regarding the Rural Territorial Tax (ITR), currently levied by the Federal Government, which transfers 50% of the collection to the municipalities, it still depends on consultation with the Ministry of Agrarian Development.

Regarding the Motor Vehicle Property Tax (IPVA), Appy said that the request for collection by city halls will be discussed by state secretaries at the meeting of the National Council for Farm Policy next week.

The tax reform proposal will be sent to the National Congress in October. Appy said that the matter should be approved by June 2008, or only in 2009.