Originally published in the June 13 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazil’s Chamber of Deputies (lower house of Congress) on June 11 approved the creation of a new 0.1 percent bank transactions tax, less than six months after the Senate let the old 0.38 percent bank transactions tax (CPMF) expire.
The new tax — the Social Contribution for Health (Contribuição Social para a Saúde, or CSS) — was approved with only two votes above the minimum required for passage (259 in favor, 159 against, and 2 abstentions). If approved by the Senate, the new tax would be effective as of January 1, 2009.
The CSS was approved as a permanent tax with an exemption for individuals with monthly incomes below BRL 3,038.99 (approximately $1,864). President Luiz Inácio Lula da Silva’s allied parties argue that will exclude 90 million people.
The creation of the CSS was included as an amendment to complementary law project 306/2008, which regulates Constitutional Amendment 29 of September 13, 2000. Amendment 29 increased the government’s disbursements to public health. Allied parties in the Chamber of Deputies have argued that the new tax is meant to finance these disbursements. Lula da Silva would not sign the complementary law without a corresponding source of revenue.
Despite being defeated by the allied parties, opposition parties at the Chamber of Deputies celebrated the 259-159 tally. In late 2007, when the chamber approved the extension of the CPMF (which was eventually rejected by the Senate), the allied parties gathered 333 favorable votes. The opposition parties now argue that such a close vote means lawmakers and the Brazilian people do not welcome a new tax.
Their hopes now turn to the Senate, where complementary law project 306/2008 must return for debate and vote. The government needs 41 votes in the Senate to approve the CSS.
David Roberto R. Soares da Silva