Source: Jornal do Commercio - PE - ECONOMY - 14/08/2009

With the tax reform dormant in Congress, States are moving in the National Council for Farm Policy (Confaz) to create an alternative reform, dealing only with the Tax on Circulation of Goods and Services (ICMS). There are six proposals that address different themes. The main points were put on the table by São Paulo and Minas Gerais and should return to the discussion in an extraordinary meeting of Confaz until the end of the month.

States want to reduce the fiscal war, which is the dispute for private investments through the granting of benefits with the ICMS, which implies a tax waiver by the governments. A peaceful point is that, in domestic sales, within states, governments will maintain independence in tax policy.

The two main proposals, says the State Revenue Secretary, Roberto Arraes, are to unify the rates on interstate exits - sale of a product produced in one state in another -, so that the resulting tax burden in these operations is 4%, and adopt full tax substitution (the collection of ICMS by the State where the product is produced, with the subsequent transfer of the tax share that belongs to the State where this article is consumed).

"Right away, these changes are already ending the fiscal war in wholesale trade," says Arraes. States neighboring Pernambuco, for example, have been flattening their gains to attract distribution centers. Pernambuco has 125 such centers.

But there are discussions that still need to move forward. One of them is the sharing of the ICMS for direct sales. Today, if a Pernambucan buys an article in São Paulo over the Internet, the tax is fully collected there, without transfers to Pernambuco.

There are still disagreements about the date for the unification of the rates (some states defend July 5, 2008, something considered unfeasible) and about the disallowance of credits (which happens when a company has a tax incentive in Pernambuco, for example, sells its product in another state that does not recognize the benefit because its revenue has been reduced). The fight usually goes to court. “We are doing the math to see if the proposals are favorable to Pernambuco. We already have a gross number, but we need to refine the data, ”explains Arraes.