Dear readers, an “out of the ordinary” year is coming to an end, for some sectors a more difficult year than for others.
We began 2024 by receiving, for approval, PLP 68/2023, aimed at implementing tax reform, more directly of the IBS and CBS, which result in VAT (Value Added Tax), which will affect everyone, industry, commerce, services and consumers; and PLP 108/2023, which will implement the Tax Reform Management Committee, which will take care of how all tax revenue will be managed and distributed, inspections and other government attributes; this committee, with many controversies to be addressed.
Let's avoid going into the details of the tax reform here, especially since, after Bill PLP 68/2023 was worked on by many hands in the Chamber, including all the lobbying and interest groups, each seeking to defend their sector, not always aligned with the country's interests, the report was approved and forwarded to the Senate, with an expected VAT of 26.5%, resulting from all the modifications, reductions, and exceptions introduced in the bill. It is worth remembering that when the tax reform began, the estimated VAT would be around 22%.
Now, in the Senate proceedings, there is already talk of an VAT exceeding 28%, logically due to more exceptions and adjustments always justified. We will have the highest VAT in the world, as far as is known, surpassing Hungary's, which is 27%. Furthermore, a careful and in-depth reading of PL68/2023 shows that there is no limit to the VAT, which could exceed 28%, and only after completing the implementation of the tax reform in 2032 will the actual VAT be assessed, and a bill will be created suggesting the removal of exceptions and elimination of imbalances, aiming to reach 26.5%. So, it's hard to think that after years of implementing tax reform and excess revenue or, let's say, revenue outside the planned percentage, there will be a strong correction and reduction. Let's wait for the impacts on the economy and retail, mainly.
Walking through 2024, we encounter another exhausting but unfinished battle: the return of the Import Tax on small-value sales operations via cross-border. It was an intense struggle, with dozens of retail associations and institutes presenting technical and social arguments for job elimination in the country to Congress and the Executive, as well as initiatives before the Judiciary, specifically the Supreme Federal Court (STF), to restore the 60% tax that had been reduced to zero. One of the most consistent studies commissioned by the IDV (Institute for Retail Development) in partnership with the IBPT (Brazilian Institute of Tax Planning) confirmed what everyone knew and still knows: the average tax burden in the supply chain up to the consumer is over 90%, so the battle is not over. We need to evolve, since the approved and currently in effect leads to a tax burden of 44.6% (composed of 20% Import Tax + 17% modal ICMS). It is easy to conclude that, despite some improvement, we are halfway there and must achieve tax equality. This cross-border issue still has other important, unacceptable points, such as the entry of imported products without certifications. The same ones that are required in the domestic market with heavy penalties when not fulfilled.
The two topics discussed above, tax reform and cross-border, would already be enough to demonstrate how much energy is required to work and undertake in Brazil, however, another topic emerged, also very relevant to the economy, bets.
Bets have taken billions of reais out of circulation from retail, services, education, and other sectors, generating high expenses for public health in treating gambling addiction and harming the well-being of thousands of families. The amounts wagered reached around R$ 90 billion in 2023, and the forecast is R$ 200 billion in 2024. Many surveys have been conducted with the population, and none showed benefits from the existence of bets, only harms, highlighting that electronic casinos and the Tigrinho games were included.
The ordinances from the Ministry of Finance regarding the regulation of bets, which are mild and have little impact, led organized civil society to request the revocation of the law that establishes electronic games in Brazil. For example, the tax to be paid by betting companies is only 12%, one of the lowest rates ever known for any business in the country, and it should be much higher when compared to products that induce addiction, such as tobacco and alcohol, which exceed 60%. It's hard to understand why such a benefit. There are so many valid arguments for revoking the betting law or at least implementing proper regulation that it would make this article too lengthy. The fact is that, at the moment, the matter is in the Supreme Federal Court, which has already ordered some urgent corrective measures. And, if the population's opinion is considered, according to the Datafolha survey published on 11/24/2024 in the Folha de S. Paulo newspaper, 65% of Brazilians believe that bets should be prohibited and 71% reject betting advertisements. The same survey found that most betting houses rely on affiliate marketing, where influencers promote bets and earn commissions based on the amounts lost by players, meaning the more the consumer loses, the more the affiliate earns.
It is also worth noting that there are two ongoing Parliamentary Inquiries into bets in the National Congress. There is hope that the betting issue will have an outcome suitable for the Brazilian people.
Note that only three topics mentioned above—tax reform, cross-border, and bets—show how 2024 has been challenging for retail, which is our focus here in this article. The retailer is a gladiator, always participating in battles to improve their business, a creative optimist who faces high interest rates and a proliferation of new laws and ordinances that arise constantly, forcing them to confront increasing expenses. Still, he does not give up, as there is a market and clients to serve, and he seeks opportunities to create new businesses, improve customer service, and increase productivity, certainly promoting progress and well-being for society.
This article would mention dozens of legal and operational obligations to which retailers and companies in general are subject, and among the many requests we could make to the country's leaders for the new year, I would highlight one in particular: make Brazil a simpler country to do business in.
