Afraid, worried and disappointed. These were the adjectives used by an executive to describe the state of mind of businessmen who participated this Thursday (8) in a luncheon with the Minister of Economy, Paulo Guedes, in São Paulo.
The executive heard by leaf, one of the meeting’s participants who prefers to remain anonymous, said that the minister arrived at the lunch excited, saying that many had predicted a drop in GDP (Gross Domestic Product) of 8% in 2020, but the drop was 4%. And that they scoffed when he, Guedes, indicated a “V-shaped recovery” for the Brazilian economy, but that is what is happening, he said, which makes him glimpse a window of opportunity for Brazil in the post-pandemic scenario.
The return of businessmen was skeptical, according to this executive. Nobody believes in growth with the current proposal for taxation on the IRPJ (Income Tax for Legal Entities). At first, the proposal foresees a gradual reduction of the rate, from the current 25% to 20% in two years, maintaining the rate of 9% of CSLL (Social Contribution on Net Income).
In addition, the government also proposed to tax profits and dividends at 20%. In the case of companies in the real profit category, the rate would rise from 34% to around 43%.
But the biggest problem with the proposal contained in bill 2337/2021, said the executive, is to tax the distribution of profits and dividends of companies and remove the right to release interest on equity (JCP). The idea is to tax profits and dividends at 20%, with an exemption of up to R$20,000 per month for micro and small companies. The reform proposal as it stands, he said, compromises investments and jobs.
Taxation of profits occurs on the legal entity and dividends are levied on the company’s shareholder or quotaholder. In the opinion of accountants and lawyers in the sector, the changes in the IR, delivered at the end of June by Guedes to the Chamber of Deputies, which make up the second part of the tax reform, could increase the taxes paid by companies.
The business community will not be encouraged to keep the company in these conditions, says the executive heard by leaf. In his opinion, instead of keeping the company, the entrepreneur will prefer to sell the business and live off interest. According to him, everyone was “outraged” that the proposal came from a liberal minister, graduated from the Chicago School.
Guedes, he said, was receptive to the complaints and said he wanted a reform that would bring balance — otherwise, he is out of government.
Bankers’ representatives at the meeting stressed that the possibility of preventing the release of interest on equity and taxing dividends is very bad for the sector. Guedes, then, would have raised the possibility of a “corporate tax” of 20%, against the current 34% paid by real profit companies.
Some businessmen complained about the tax reform without a comprehensive administrative reform in the government. About this, says the executive, Guedes made it clear that the administrative will only be valid for new civil servants, because the current ones have acquired rights.
The minister suggested that businessmen organize, by sector, a study on the economic impacts of the measures and forward, as soon as possible, the respective reports to their technical team.
Lunch was at the apartment of João Camargo, manager of the Esfera Brasil business group, in Morumbi, west of São Paulo. Some names that had been released by the Ministry of Economy, such as Luiza Helena Trajano (Magazine Luiza), André Esteves (BTG), David Feffer (Suzano) and Flávio Rocha (Guararapes/Riachuelo), were not present.
But there were Luiz Carlos Trabuco (Bradesco), Vander Giordano (Multiplan), Rafael Furlanetti (XP Investimentos), Washington Cinel (Gocil Segurança e Serviços), Jean Jereissati (Ambev), Isaac Sidney (Febraban), among others.
Other names that were not on the list were also present, such as businessman Michel Klein (from the founding family of Casas Bahia), banker José Olympio Pereira (Credit Suisse) and the president of Abrasca (Brazilian Association of Public Companies) and Cosan, Luis Henrique Guimarães. Guilherme Afif Domingos, special advisor to the Ministry of Economy, also participated.
Guedes also made a point of emphasizing that Congress works in line with the government and gave as examples the provisional measure that allowed the privatization of Eletrobras, the new sanitation framework and the proposed sale of Correios.
After lunch, Guedes received businessmen linked to construction and development at the Ministry of Economy office, in the central region of the capital. There, for just over an hour, he heard from the participants that, as the reform bill stands, it will weaken and make investments in the sector unfeasible.
Guedes told the businessmen that the Federal Revenue Service —from which the bill came—may have been wrong in the dosimetry of the measures and reaffirmed that the reform will be neutral, that is, it will not increase the tax burden, it will only redistribute the collection.
“We ask the minister for equity so that there are no more taxes. Legal entities are already heavily taxed”, says Antonio Setin, from Setin Incorporadora.
In his opinion, Paulo Guedes is receptive to the idea that, by reducing the IRPJ, there is an incentive for the money to stay in the activity – instead of becoming a dividend.
Another concern of the sector is in relation to the collection of income tax on SPEs (Specific Purpose Companies), according to the president of Abrainc (Brazilian Association of Real Estate Developers), Luiz França.
The SPE is formed specifically for a specific project, in order to guarantee the property buyer that the property of the developer is healthy. “At the end of the project, the SPE sends its profit to the holding”, says França. “If there is an income tax charge at this time, this becomes a cost for the company”, he says.
The collection of tax on an SPE’s profits is not specified in the bill, but the wording allows for this interpretation.
“But the minister defended the reduction of the tax burden for companies and asked the sector for a technical study on the impact of the proposals presented by the government, which we are going to provide,” he said.
Setin said the minister also signaled favorably for the review of the taxation of real estate funds. “He understands that it is possible to stipulate a minimum threshold for not catching the small investor.”
Under the project, income from FII (Real Estate Investment Funds), currently exempt from income tax, would be taxed at source at 15%.
According to businessmen who attended the meeting, there was a lot of apprehension before the meeting. The conversation with the Minister of Economy would have managed to calm the tempers.
Basílio Jafet, president of Secovi-SP (housing union), says Guedes assured that the reform will not disrupt the tax system, nor complicate the situation of businessmen, and stressed that it is necessary to take advantage of the current window for the approval of the text.
Next year, with elections in October, is considered an unfavorable period for complex and important discussions, since lawmakers tend to pay more attention to the bases and are more exposed to demands.