From airline tickets to bars and restaurants: the different impacts of tax reform on services G1

1 of 2 From airline tickets to bars and restaurants: the different impacts of tax reform on services. — Photo: Felipe Menezes/Inframerica | Fabio Tito/g1 From airline tickets to bars and restaurants: the different impacts of tax reform on services. — Photo: Felipe Menezes/Inframerica | Fabio Tito/g1

The proposal will be voted on this Tuesday (7) in the CCJ.

The excerpts received include something provides for differentiated taxation of services such as hotels, amusement parks, theme parks, bars, restaurants and regional aviation. What is new in this part of the text is the inclusion of travel and tourism agencies.

The major airlines that had already applied for inclusion in the differentiated tariff system remained excluded from this section. However, the sector was mentioned in another part of the proposal, which is a “positive signal” from the perspective of the association representing airlines.

In practice, differentiated tax systems in most cases mean that fewer taxes are paid. For this reason, industries are seeking tax reform exemptions.

Amid the changes proposed by the reform, the g1 spoke with segment representatives and experts to understand the impact on activities. The highlights are:

• Bars and restaurants listed as exceptions in the text expect an improvement in the financial situation — but this does not mean that there will be a fall in consumer prices;
• According to Abrasel, improving the environment will only help the segment recover from losses caused by the pandemic and “keeping the doors open”;
• Airlineson the other hand, predict an increase in the tax burden of the activity by 315% if they do not effectively fall under the exemption;
• According to Abear, increasing taxes could lead to a Increase of R$11 billion per year for airline payments;
• The impact, the association said, would be “unaffordable costs for the industry” and for anyone who wants to “continue to fly or have access to air transport for the first time”;
• The headquarters of the Brazilian services sector calculates a general increase with different impacts for each segment ​​​​except those subject to special regulations.
• On the other hand, one expert notes that the new legislation may even have a small impact on the prices of goods and services purchased by families, but on average the current taxation will be maintained (see below).

The Senate’s statement on tax reform contains changes compared to the Chamber’s

The impact on bars and restaurants

The inclusion of these companies in the differentiated tax system was celebrated by the industry. According to the president of the Brazilian Association of Bars and Restaurants (Abrasel), Paulo Solmucci, the measure could represent a relief in a scenario in which Around 50% of businesses operate without making a profit.

“It is a sector that today uses 10% of its revenues to pay off debts that have accumulated since the pandemic. If there was no understanding this decision to adopt the global standard to reduce the tax rate it would be chaos for the industry,” says Solmucci.

It refers to the inclusion of bars and restaurants in a specific tax rate, which still needs to be defined in a complementary law which should prevent the activity from charging the full percentage of the two valueadded taxes (VAT) proposed in the reform.

2 of 2 What the taxes will be like with the tax reform — Photo: Arte g1 How the taxes will be with the tax reform — Photo: Arte g1

The text provides for a transition period of seven years (between 2026 and 2032) to standardize taxes. From 2033, current taxes will be abolished. Understand.

According to Solmucci, 40% of bars and restaurants have outstanding debt, with 82% owing federal taxes, for example. In this scenario, the optimism with the reform text aims to recover the sector after the losses caused by the pandemic. However, this does not necessarily mean that there will be a fall in consumer prices.

“The expectation is that this will generate productivity, reduce the cost of purchasing items in the industry and improve margins.” [de lucro]with debt reduction,” he says. “I don’t see the price shifting at first.” [ao consumidor]because we work without profit,” said the president of Abrasel.

“[A reforma] “It will help keep the bar we love open,” Solmucci concludes.

A survey by Abrasel based on data from IBGE’s Pnad Continua shows that there are 5.5 million workers in the sector and another 1.9 million entrepreneurs.

According to the company, the proposal resulted in a “distortion” as all types of public transport, except air transport, were treated with a reduced fare. Only that was quoted in the text regional aviation.

Felipe Bonsenso, specialist in aviation law, explains that regional aviation is that in which aircraft with up to 60 seats are used on routes considered “secondary” and lasting a maximum of two hours.

“These are flights that serve cities that are not covered by major airline routes. In other words, they are routes that do not include, for example, São Paulo, Rio de Janeiro, Brasília and Salvador,” he explains. “There is a certain amount of discussion, basically just today [companhia aérea] “Azul explores these routes with smaller aircraft,” he says.

Gol and Latam are represented by Abear while Azul is not associated. When asked about the possible impact of the reform, the company said it would not comment.

However, the new statement submitted to the CCJ by Senator Eduardo Braga pleased the airline association.

“The report sent a positive signal to the aviation sector by including it in the list of activities subject to the special tax regime. The change is important because it allows for a more indepth discussion on the tariff and credit rules,” says Abear President Jurema Monteiro.

A study commissioned by the aviation industry estimates that the tax burden on the activity will increase by 315% if it is not included in a special tax system. The result would be an increase R$11 billion per year for airline payments.

There are fears that this will result in a passon to passengers who are already facing high prices in this segment compared to previous years.

According to Anac, the average tariff last year was BRL 644.5. The value is R$113 more expensive than in 2021 and R$126 higher than in 2019 before the pandemic. Taking into account the monthly average, the price was 572 R$ in February 2023.

The airline association assumes that companies will have to downsize their operations if the reform does not fall under a special regulation. Currently, more than 2,200 launches per day are estimated in the country.

In practice, as the company’s president said after the adoption of the text in the Chamber, this would mean a reduction in the aircraft fleet and the number of jobs they directly create.

“Our demand is for equal treatment of public transport in Brazil. “Our aim is to remain in line with other modes of transport so that Brazilians can choose between bus and plane, depending on what they prefer.”

Reduced tax rate and differentiated treatments

The text currently being discussed in the Senate provides for a reduction in the two VAT rates for certain goods and services and also creates further differentiated tax treatments that must be set out in a supplementary law.

Several sectors are expected to benefit from lower consumption tax rates. Between them:

• urban collective public transport services;
• medication;
• health services;
• educational services;
• Agricultural products.

Freelancers such as lawyers, engineers and accountants are subject to a different tax rate, namely 70% of the general taxation of all sectors.

The text analyzed by the Senate defines that these advantages for economic sectors will be reviewed every five years based on, among other things, economic, social and ecological performance goals.

Exceptions may increase the rate

The application of exemptions that is, favoring a particular sector of the economy tends to have an impact on the general consumption tax rate. initially estimated at 25%. Minister Bernard Appy defends as few exceptions as possible.

The explanation is that to maintain the same tax burden By granting preferential treatment to certain sectors, it will be necessary to increase the general tax rate and thus charge higher fees for all activities.

“The more exemptions there are, the more preferential treatments, the higher the tax rate must be for other sectors to maintain the burden. It is a political decision of the Congress to know whether it is justified to have preferential treatment here or not,” Appy said in a debate in the National Congress.

According to Haddad, the exemptions provided for in the Senate represent an increase of 0.5 percentage points compared to the text adopted in the Chamber of Deputies a version that, according to the Department of Finance, indicated that this will be the future of VAT could be up to 27%.

That would be the case one of the highest tax rates in the world. The minister’s statement was made after a meeting with Braga last Thursday (2).

In a study on the possible impact of the tax reform on the services sector, the Brazilian services sector Central (Cebrasse) expects an overall increase different impacts for each segment. Those classified as special regimes are not included in the count.

The highlights of the survey are: Security, surveillance and investigative services and for these unfurnished rental and management of nonfinancial intangible assets (e.g. car, computer and machine rental).

The prediction for these two groups is that the Tax burden doublesaccording to Jorge Segeti’s calculations. See below:

Impact of the introduction of the 25% VAT in the services sector

For the Brazilian service sector Central (Cebrasse), the increase in taxes for security, surveillance and cleaning companies can increase the costs and thus also the amounts for condominiumsFor example.

Jorge Segeti says that although the industry is not against the introduction of VAT, the reduction in payroll tax is necessary to prevent an increase in consumer prices.

“The payroll has not been changed and salaries continue to be taxed at 40%. For example, for an employee who receives R$1,000, you will have to spend R$400 in taxes. And that doesn’t include the 13th salary or vacation. That’s it.” “Just taxes that go to Social Security. This point has not been changed. It remains heavy,” he says.

A study published by XP Investimentos as part of discussions in the Chamber of Deputies suggests that the services sector may have a “mixed impact” or even suffer more than others in contrast, for example, to the industrial and export sectors, which tend to benefit the most .

“[Com a aprovação do texto atual no Senado] The services sector would suffer the most although this would be offset by longterm economic growth,” the publication said.

For international consultant Melina Rocha, specialist in VAT, the tax reform “impacts slightly the prices of goods and services purchased by families, but on average maintains the current taxation”.

“Since the tax reform aims to maintain the current tax burden, any reduction in the taxation of one consumer item will tend to be offset by an increase in the taxation of other consumer items, so that the overall taxation of Brazilian families remains the same,” he says.

It concludes that overall and taking into account the entire consumption basket, “the tax burden on Brazilian families will continue to remain the same.”