In the Brazilian economic panorama, agribusiness occupies a highly relevant space. This statement is based on data from the Center for Advanced Studies in Applied Economics – CEPEA, which estimates that the sector will be responsible for around 24.4% of the country’s GDP by 2023, which represents approximately R$2.63 trillion.
It is precisely because of its importance that much has been discussed about the impacts of the Tax Reform on this sector, especially in the regions that stand out in agribusiness.
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Impacts of the Tax Reform on agribusiness
Some points of the reform worry producers. The first is related to the weakening of the federative pact in view of the abolition of the ICMS. In addition, it is possible that there will be a reduction in tax collection for all Brazilian states.
Another worrying point is the extinction of tax benefits, which could cause capital to migrate to other economic centers.
To make it clearer what the current system is and what it will be like with the reform, below is a graphic diagram. Check it out!
As you can see, the new rules will create an IBS tax (Tax on Goods and Services) and a CBS contribution (Contribution on Goods and Services), which will be levied nationwide and at a single rate for all sectors of the economy.
Complementary Bill No. 68/2024, which regulates the tax reform, was approved by the Chamber of Deputies, and now goes to the Federal Senate for consideration and presidential sanction.
The bill establishes the Tax on Goods and Services (IBS), the Social Contribution on Goods and Services (CBS) and the Selective Tax (IS). The approved text included an estimated 26.5% cap on the tax rate (CBS + IBS), following the Value Added Tax (VAT) model.
The Tax Reform confirmed the intention to put an end to special and/or differentiated regimes. As said, this move creates insecurity for agribusiness.
The sector has numerous tax benefits that are intended to balance out all the risks involved in its operations, as well as its undeniable importance, given that these are goods that guarantee human subsistence.
To balance out the end of the tax benefits, the tax reform provides for a 60% reduction in the IBS and CBS rates for food intended for human consumption, agricultural, aquaculture, fishing, forestry and extractive plant products in natura and agricultural and aquaculture inputs.
One of the greatest benefits of the reform is the implementation of full non-cumulativeness, allowing the full use of tax credits, which will certainly bring benefits to the sector.
This is the foundation on which the reform is based, aiming to eradicate the cascading effect that makes national taxation so expensive and complex. As a result, the agro-industry will be able to enjoy a more predictable and equitable tax environment.
Another benefit is the reduction of the IBS and CBS rates to zero for products intended for human consumption that make up the National Basic Food Basket.
These reductions are greeted with optimism as they benefit the consumption, production and marketing of these essential items.
If implemented as approved, these measures have the potential to prevent a rise in product prices by easing the tax burdens that are worrying companies in the sector.
Points of attention
In addition to the IBS and CBS, we will also have the Selective Tax – IS, which will be levied on the production, extraction, marketing or import of goods and services that are harmful to health or the environment.
This tax could cancel out the reduction granted to the sector, as it has the potential to increase the tax burden on vital inputs such as pesticides, herbicides and insecticides.
Although these inputs are not included in the scope of the IS in the text currently before the Senate, there is pressure to include them.
The fear is that this tax increase will neutralize the benefits of the reduction in the general rate and negatively affect the cost of production, with possible passing on to the end consumer.
Main changes compared to the current system
Below is a table summarizing the main changes brought about by the Tax Reform compared to the current system:
Conclusion
It is prudent to remain moderately cautious about the reform, even though it proposes a promising scenario, the implementation of the changes and the maintenance of the effective tax burden will still require careful observation and assertive fiscal management.
The discussions are not yet closed, but one thing is certain: understanding the issues being addressed must be a priority for companies that want to prepare for the next stages of the Tax Reform.
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