New tax framework makes contingencies optional

An instrument traditionally used to adapt the Budget to fiscal targets, the contingency (blocking) of expenses will no longer be mandatory with the new fiscal framework, whose supplementary bill was sent this Tuesday (18) to Congress. The procedure will become optional, being decided by the Powers themselves. Currently, the government sends to Congress, every two months, the Revenue and Expenditure Assessment Report to verify whether the spending ceiling and the primary result target (result of government accounts without public debt interest) are being met. . If there is insufficient revenue or excess expenditure, the government has to make allowances for discretionary (non-mandatory) spending. With the new framework, reports will be made three times a year: in March, June and September. If the documents identify that the fiscal targets will not be met, each branch of the Union (Executive, Legislative, Judiciary), in addition to the Public Ministry of the Union and the Public Defender’s Office of the Union, do not suffer punishment or need to block spending. They just won’t be able to increase spending in nominal terms. As with the current system, there will be annual spending limits for each Power. Noncompliance The new framework changes the Fiscal Responsibility Law and removes punishments in case of noncompliance with fiscal targets, such as impeachment. However, it establishes the obligation for the President of the Republic to justify himself to the National Congress and point out measures to rebalance the public accounts. “[Em caso de descumprimento das metas fiscais], the president will send a message to the National Congress, by May 31 of the following year, with the reasons for the non-compliance and the corrective measures”, highlights the project. Automatic adjustment According to the project, fiscal targets will continue to exist, but they will no longer be imposed. The new framework provides for a tolerance interval (up or down) of 0.25 percentage points of the Gross Domestic Product (GDP) for the targets established by the Budgetary Guidelines Law. If the primary result falls below the target floor, there will be an automatic adjustment. Expenses will stop growing by 70% of the real rise (above inflation) in net revenues and will grow less: 50%. The lower growth will last until the lower threshold of the target is reached. If the primary result is above the target ceiling, the surplus will be used for investments (public works and equipment purchases). However, according to the text sent to Congress, the surplus that can be reallocated for investments is limited to BRL 25 billion per year between 2025 and 2028, with the amount corrected annually by the Extended National Consumer Price Index (IPCA).

Agência Brasil