Brazil’s Congress has approved a major tax reform in what is a political victory for leftist President Luiz Inacio Lula da Silva and a turning point for Latin America’s largest economy.
This is the first reform of the consumption tax system in Brazil since the military dictatorship in 1964.
On Friday, the House of Representatives approved this proposed constitutional amendment, in two separate votes, by a majority of 365 votes in the final round, while it needed 308 votes. This came during the second revision of this text after the amendments made by the Senate in November.
“It is the most important reform because it regulates the entire productive system,”Finance Minister Fernando Haddad said after the vote.
He added that this reform “puts Brazil with the newest countries in the world”.
For his part, the president of the Congress Artur Lera called this day a “historic day”, stressing that this reform aims to”reduce bureaucracy and make the calculation of taxes more transparent”.
Such a reform, which the government calls “historic”, was desired by former executives, especially the far-right President Jair Bolsonaro (2019-2022), but each time he was faced with a lack of consensus.
This reform combines five taxes into one, namely VAT, which will be divided into a federal tax and a state tax. It also lowers tax rates in sectors such as health, education and basic foodstuffs, and includes incentives for manufacturers of electric cars and biofuel-powered vehicles
