Government considers postponing tax again to give businesses some breathing room.

The federal government has included in its menu of possible measures to stimulate the economy at the beginning of this year a new round of tax deferrals (postponement of collection) for companies.

Just as happened in the first half of last year, at the forefront of actions to combat the economic effects of the pandemic, the idea is to give companies a little more leeway in their cash flow, a kind of working capital, so that they can have greater productive capacity and, if possible, open up space for investment.

An economic expert stressed that this is a tool that has already been used and is currently under discussion. Furthermore, the government is evaluating the possibility of advancing the 13th-month salary payment for retirees from the National Social Security Institute (INSS) and the salary bonus – a strategy also adopted at the beginning of the pandemic. This measure involved R$ 24.3 billion.

For now, the economic team has not yet made a final decision on adopting these measures. All of them had already been implemented last year to address the economic crisis generated by the coronavirus and were well-received. The resumption of this strategy is being considered as a mechanism to provide some support to the economy without fiscal impact, given that these actions, in theory, only alter the flow of revenues and expenses and not their final result.

In the case of the three-month deferral of federal taxes in 2020, the economic team aimed to provide relief of R$ 33.3 billion, resources that would be "returned" to public coffers starting in August. There is a risk of fiscal impact due to the possibility of default. A final balance of how much was not returned to the government has not yet been released, although most of it was paid on the new date that the Economy Ministry had defined.

Since the end of last year, the Ministry of Economy has been preparing to deal with a tougher first half of the year for economic activity, mainly due to the end of the emergency aid program, despite the optimistic discourse. The prevailing view is that the benefit, which was initially R$ 600 and later R$ 300, has already served its purpose and, given its fiscal cost, its termination last year was the most appropriate course of action.

Now, Minister Paulo Guedes' team will monitor the economy's reaction and has a kind of planned sequence of actions to ensure that the level of activity maintains a trajectory, should there be any loss of momentum on the part of the private sector.

In addition to the tax deferral and advance payment of benefits adopted last year to combat the effects of the coronavirus, the government also allowed the postponement of social security contributions and the Guarantee Fund for Length of Service (FGTS) payments, and temporarily suspended debt collection. There was also an exemption until the end of 2020 of the Tax on Financial Operations (IOF) on credit operations, which would have an estimated impact on revenue of R$ 18 billion.

Source: Economic Value