Originally published in the May 30 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Opposition parties in Brazil’s Chamber of Deputies on May 28 blocked a maneuver by President Luiz Inácio Lula da Silva’s allied parties to resurrect the bank transactions tax, which expired on December 31, 2007, after the Federal Senate refused to extend it.
Allied parties included the re-creation of the bank transactions tax as an amendment to a complementary law project that regulates constitutional amendment 29 of September 13, 2000 (complementary law project 306/2008). Amendment 29 increased the government’s spending on public health, and the allied parties argued that the new tax would finance the disbursements.
The Social Contribution for Health (CSS), which is intended to be used exclusively for public health spending, was proposed as a permanent tax with a rate of 0.1 percent. In an attempt to gather support in the chamber, allied parties agreed that the new tax would not enter into force until January 1, 2009, in part because of the mayoral elections in late 2008.
During the chamber’s May 28 evening session, however, opposition parties presented a series of requests that, under the chamber’s Code of Procedures, had to be put to a vote before the law project. At 2 a.m. on May 29, the allied parties backed off and decided to postpone the vote until the week of June 2 in the hope that they would have enough votes to get the tax approved.
The government has estimated that it would collect between BRL 9 billion and BRL 12 billion per year from the CSS.
However, some observers say that if the tax is enacted, it will create a series of constitutional problems because new taxes are supposed to be created by way of a constitutional amendment (as was the previous bank transactions tax), rather than by complementary law.
David Roberto R. Soares da Silva