Brazil: Tax ‘reform’ serves the core interests of the ruling classes

We publish this unofficial translation of the article of A Nova Democracia found here

The approval of the tax “reform” last July 7 calls attention to the speed with which it was approved. Why was that? In addition to introducing a wide range of counter-reforms, fundamental for Brazilian bureaucratic capitalism, the government of Luiz Inácio pleased all the shades of reactionary political parties through the approval of the parliamentary amendments. However, the main reason for the speed was that the text approved by the vast majority of the reactionary “congressmen” – 382 against 118, including part of the PL itself, Bolsonaro’s party, voted in favor – fully complied with the strongest political lobby: the banks and big landowners (mainly from “agribusiness”, focused on the export of commodities).

The mobilization of these power groups from the ruling classes, linked to bankers, big landowners and large mining companies, proved to overcome all “ideological divisions” and really made a difference. If this were not the case, it would be impossible for the government to approve the tax “reform” two months after the MP [translator’s note: Provisional Measure] for the Ministries and three months after the vote on the “fiscal framework” – occasions on which, it is noted, the pelegão [translator’s note: referring here to Lula, a trade union leader who is in the service of the bosses and the State] also opened his wallet to avoid a political crisis (since the beginning of the year, R$ 16.3 billion were released by the federal government). Luiz Inácio is not only in the hands of Arthur Lira, but is also in the lap of the landowners and the bankers.

What does the tax “reform” say?

Originally, the text of PEC 45/2019 provided for the creation of a single tax, the Tax on Goods and Services (IBS), to be administered by a management committee. Federal, state and municipal taxes would all be incorporated into the IBS.

The main changes revolve around the creation of three taxes and the elimination of others. Those created: the IBS, which includes state and municipal taxes; CBS, the Social Contribution on Goods and Services, which would include PIS [translator’s note: Social Integration Program] and Cofins [translator’s note: Contribution for the Financing of Social Security]; and the Selective Tax, to discourage the consumption of products considered harmful to health or the environment (cigarettes, alcoholic drinks, etc.). The extinct ones: IPI, ICMS, ISS, etc.

Despite the substantial changes, the main thing was the movement of certain sectors of the ruling classes in order to enforce, there in the text, the interests of their layers and groups. Let’s see.

According to the approved text, the Selective Tax excludes sectors of mining and agribusiness owners from charges – despite the fact that agribusiness and mining are the final activities and products that have had the greatest impact on the natural environment (just remember Mariana and Brumadinho) [translator’s note: accident caused by the mining industry that resulted in a dam failure killed hundreds of people and buried entire communities]. Ironic. Those big landowners who buy aircraft, machinery, tractors and other vehicles will also be exempt from paying IPVA, while peasants will continue to pay a high IPVA on their cars used in their small production. As for the Tax on Industrialized Products, amazingly, it will not reach the big industries (!). Despite skyrocketing interest rates, banks will also not be affected by the current tax “reform” – they will have a “special regime” to be defined later. Everything will end between friends.

Who supported and who celebrated?

So much is it a “reform” that serves solely and exclusively the interests of the ruling classes that the Parliamentary Front for Agriculture (FPA) released a note defending the approval of the tax “reform” shortly after Arthur Lira (president of the Chambers of Diputies) announced the vote.

On the side of the bankers, the president of Bradesco [translator’s note: the bank with the second largest liquid assets and the largest assets in Brazil] (Luiz Carlos Trabuco) celebrated the approval of the tax reform: “the Brazilian tax system gains freshness and modernity”. The president of Itaú Unibanco [translator’s note: the largest banking institute in Brazil and in Latin America] followed the same tone and stated that Lula’s tax “reform” “attacks the central point of the country, which is tax simplification”. Representatives of BTG Pactual, Santander and other big names of the big bourgeoisie also celebrated.

The following is clear: Fernando Haddad’s Ministry of Economy is the favorite of bankers and big landowners; the government of Luiz Inácio, therefore, has proven to be a safer ally of the ruling classes than its predecessor, Jair Bolsonaro. Sad, but the results don’t lie.