Tax reform regulation makes mistakes in opening room for increase in telecom burden

By Conexis

This is a machine translation of the original press release issued in Portuguese.

Brasília, 07/04/24 – The text for the Tax Reform regulatory project presented this Thursday (4) represents a risk to one of the most important premises of a structuring reform, which is the maintenance of the tax load, while it did not include reducing the tax burden on essential telecommunications services for the neediest Brazilians.

“We recognize the challenges and thank the representatives of the working group for their openness to dialogue, however the sector understands that with the regulations presented, the country loses the opportunity to advance in digital inclusion”, stated the executive president of Conexis Brasil Digital, Marcos Ferrari.

Maintaining the inclusion of interest, fines and charges in the IBS and CBS calculation base will increase the tax burden in several sectors, including telecommunications. 

The sector's tax charge today is 29.3%, the third highest among the 15 countries with most mobile lines. The text presented today will increase taxation in the sector, harming millions of Brazilians, especially those with low incomes. In addition to penalizing the sector, the measure is unconstitutional and must be corrected in the text to be voted on by lawmakers.

The report also allows cascading taxation for telecommunications services, as it prohibits credit for all operations related to goods for personal use and consumption, instead of prohibiting credit only for transactions on goods and services considered non-essential (weapons, ammunition, alcoholic beverages, jewelry, among others).

Another point not included in the report, which will mainly harm low-income families, is the non-inclusion of telecommunications in the cashback rate of 50% for CBS and 20% for IBS. Here, it is important to highlight that these families spend around 12% of their family budget on telecommunications services.

Despite being recognized as an essential service and extremely important for economic and social development, the sector suffers from an extra burden that increases the telecommunications tax burden by 3.8 percentage points, due to sector funds and CIDEs (FUST, FISTEL, FUNTTEL , CRFP and CONDECINE). The request for these funds, which are used for the government's primary surplus, to be absorbed by the CBS was also not included in the report.

As a positive point, the report adjusts art. 11, inc. IX, to make the definition of “transmission by physical means” clearer, for the purposes of “location of operation” of communication services, ensuring greater legal certainty for the taxpayer at the time of collecting the tax.

Conexis continues to defend the broad debate on this matter that is so important for the modernization of the country's business environment and hopes that its observations are perceived as relevant, thus guaranteeing the preservation of the basic premises of the tax reform.