Approved in the House at the end of 2021, but vetoed by the president at the beginning of 2022, the refinancing of the debts of small businessmen – called Relp (Program for Rescheduling Payment of Debts in the Scope of Simples Nacional), but known as the new Refis do Simple—must take center stage as soon as the parliamentary recess ends.
For the official justification, the veto is due to the tax benefit implying a waiver of revenue, which violates the tax rules. The program, however, has unanimous support from congressmen, and the presidency itself is already working on publishing a decree, a kind of provisional solution that extends the deadline for debt settlement, while the veto is not overturned by Congress.
For him, Simples small businesses, individual microentrepreneurs and companies undergoing judicial recovery will be able to renegotiate their tax debts, with discounts on interest, fines and charges proportional to the drop in billing during the pandemic.
It can be debated whether Covid-19 is an extraordinary condition to justify tax leniency, but this is just one among countless other so-called “exceptional” tax debt installment programs.
Over the past two decades, around 40 similar programs have been created with significant reductions in fines and charges and extremely long payment terms.
Among them, the Special Installment (2003), the Exceptional Installment (2006), the Refis da Crise Program (2008), the First, Second, Third and Fourth Reopening of the Refis da Crise (2013-2014), the Tax Regularization Program (2017), the Special Tax Regularization Program (2017), the Special Installment for Simples Nacional Debts (2018) and the Rural Tax Regularization Program (2018).
Not to mention sectoral renegotiations, such as with higher education institutions and sports and charitable entities, and renegotiations with federated entities, such as the Special Installment for Social Security Debts of States and Municipalities (2018).
The huge list shows that there is a recurring pattern in the way tax debts with the Union are treated by the political class, which insists on renegotiation as the best way to recover a debt. It is argued that the cost of renegotiation is not high and that it increases the collection of debts that would never be paid. The argument is false.
About half of those opting for special installments become defaulters, according to a 2017 Federal Revenue study. Another part ends up including the debt in installments in another supervening program, which causes many taxpayers to incorporate the culture of non-payment into expectation of a new installment program with special conditions. Few are able to settle the amount owed.
In the specific case of Simples Nacional taxpayers —who already have a differentiated tax regime of R$82 billion in tax exemptions—, the same report indicates that only 0.52% of installments were paid, while 49% were terminated by default.
The recurring renegotiation of tax debts perpetuates a pattern: whoever owes is always forgiven, and therefore, eventual punishments for default are not taken seriously. It is not surprising that year after year the entire business class asks and waits for a new Refis.
The culprit is always the economic crisis. But, in fact, non-payment is an optimal response from the business community, which takes into account that renegotiations are, in general, much more favorable than payment on time.
The political class lacks a basic understanding that debt renegotiation plans generate incentives for non-payment, and therefore, an endless pressure for new renegotiations. The constant editing of programs of this nature encourages a culture of default, damages public coffers and directs resources towards ineffective policies.
In Brazil, those who honor their commitments and pay their taxes on time are a terrible entrepreneur, as they act against the interests of their own business by ignoring future special installment programs. It’s good to be a bad payer.
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