Source: Brasil Econômico (São Paulo - SP) - 24/05/2012

Recent measures taken by the government of President Dilma Rousseff have enabled the creation of a more favorable environment for the approval of tax reform in the country. The debate over reform is paralyzed in the National Congress because governors lack involvement in the issue, without which, it will not be possible to approve a broad and complete reform.

With no signs that this situation will change, the federal government decided to change its strategy and began to modify the taxation of certain sectors and to seek the formation of a scenario that encourages the entry of governors in the debate.

The first step was taken with the approval of Resolution 72, which put an end to the so-called port war, by standardizing the taxation of imported products and removing from the states the possibility of playing with the rates in practices harmful to the national industry.

The need to stimulate productive growth in the coming years led to change, but our industrial sector, as well as society as a whole, still suffers from a confusing, regressive tax model that has the biggest mark of increasing the cost of Brazilian production. This needs to change for some time, but the resistance and obstacles created by the opposition in the Lula government prevented the approval of the reform.

The proposal sent by the Lula government to Congress addresses the main points of the reform of our tax system. The core, and therefore the center of controversy, is the way of charging the ICMS (Tax on the Circulation of Goods and Services), a tax that today has more than 27 different legislations, opening space for the states to make a fiscal war.

In short, ICMS taxation is the biggest obstacle to reform. By ending the port war, the federal government paved the way to advance the ICMS reform. It also counts in favor of the fact that the Federal Supreme Court (STF) has already decided that it is necessary to revise the criteria for sharing the State Participation Fund (FPE) by December this year. In addition, the fiscal war was considered unconstitutional.

The basis for resuming debates on reform is the system adopted in Resolution 72, that is, standardizing ICMS charges for interstate transactions in a range of lower rates - today, this range ranges from 7% to 12%, depending on condition and the product sold. The next step would be to pass the collection to the destination (place of consumption of the product), instead of making the collection at the origin (place of production), as it is today.

This standardization would remove the instrument that states use for the fiscal war. The next step would be to consider the other taxes to unify the taxation in the future VAT (Value Added Tax).

There are other important points, such as taxing large fortunes, introducing a progressive character in the tax system, stimulating research in technology and innovation, in addition to constituting a regional development fund that compensates for losses in revenue with the reform.

Once again, the federal government is looking for ways to overcome a tax system that harms production, hinders national development, and burdens precisely those it needs to favor. And the states? Will they return to sit at the table and discuss the matter for the good of the country, or will they repeat the narrow-minded posture of yore?

 José Dirceu is a lawyer, former Minister of the Civil House and member of the National Directorate of PT