On August 25th, parliamentarians and representatives of civil society presented nine proposals for a green tax reform. These proposals aim to address two crucial challenges for Brazil's development: firstly, simplifying rules, reducing the tax burden, and eliminating harmful subsidies; secondly, fostering a green economy that places the country at the forefront of the 21st-century development paradigm.
Addressing the vast array of taxes and fees levied on the productive sector is one of the most urgent challenges for fostering the country's development. However, this work cannot be disconnected from the environmental and climate challenges facing Brazil.
The good news is that a sustainable tax reform is not only possible, but also contributes to a gradual reduction in the tax burden and makes the system simpler and more socially just. This is the main conclusion of the immersion carried out by the Working Group on "Sustainable Tax Reform," formed within the Collaborative Advocacy Network – RAC, which resulted in a document with nine proposals supported by ISPN and 12 other civil society organizations.
“We identified nine key points within the national tax system that, if activated, will set in motion the gears that allow us to transition to a low-carbon economy, generating new jobs and well-being for the population and updating our tax policy to converge with the Paris Agreement and the National Policy on the Environment, Biodiversity and Traditional Peoples and Populations,” highlights André Lima, from IDS – Institute for Democracy and Sustainability, who coordinated the work of the Working Group.
Starting from elements and guidelines presented by the economist Bernard Appy, the work concluded with nine proposals:
1: Guarantee socio-environmental principles in the tax system.
To ensure that the current reform of the National Tax System is in line with sustainable socio-environmental principles and with the constitutional provisions already established in this regard. The principles to be integrated are those of prevention, polluter-pays, and protector-receives. Harmonization between them is achieved through differentiated tax treatment according to environmental and climate impact.
2: Improve Local Climate and Socio-environmental Governance – Ecological IBS
Create a mechanism for compensation and financial transfer to municipalities (inspired by the Ecological ICMS) that encourages good results in local climate and socio-environmental governance, considering biodiversity indicators (indigenous lands, conservation units and remnants of native vegetation), improvements in sanitation and solid waste management indicators, and performance in the management, mitigation and adaptation to climate change.
3: To promote “sustainable” regional development.
To encourage sustainable regional development, combat social and regional inequalities, and promote national integration through direct support for productive activities or investments in sustainable economic infrastructure that align with the national climate change policy and benefit traditional peoples and communities, small and micro-entrepreneurs, and family farmers.
4: Guarantee the full municipalization of the ITR (Rural Land Tax) and, with the CIDE (Contribution for Intervention in the Economic Domain) on land use, encourage the productive and sustainable use of land.
Adapt the current ITR (Rural Land Tax) by giving it a revenue-raising function for municipalities and institute the CIDE (Contribution for Intervention in the Economic Domain) for land use, with an extra-fiscal function (without a revenue-raising function) to discourage unproductive and unsustainable use of rural land.
5: Transform the CIDE-Fuels tax into a CIDE-Carbon tax or CIDE-Environmental tax.
To improve the scope, incidence, and effectiveness of the CIDE (Contribution for Intervention in the Economic Domain), aiming to combat the emission of pollutants, protect the environment, and ensure climate stability, in accordance with item VI of article 170 and article 225 of the Constitution.
6: Specify environmental externalities for selective tax collection.
To improve the proposal for the federal Selective Tax, explicitly stating its application to environmental externalities. Thus, the law regulating the tax could guarantee its selective application to products and services that, measurably, harm or may harm the health and well-being of the population, the climate, or an ecologically balanced environment.
7: Offsetting taxation on green economic activities
To ensure that differentiated treatment is given to producers and service providers who effectively contribute to the climate and sustainability in Brazil, through the partial return of the IBS (Tax on Goods and Services) paid for activities considered, in the regulation of the law, as "green" or sustainable (with the creation of a National Registry of Green Activities – "CNAE Verde").
8: Prohibit the granting of benefits to highly polluting activities.
To guarantee the premise that no tax benefits or subsidies will be granted to highly carbon-emitting activities in Brazil, through an express prohibition in the Constitution.
9: Differentiate the gradual elimination of subsidies
Eliminate, with differentiated and progressive deadlines, the incentives granted to sectors in line with national and international forestry, climate and socio-environmental policies, that is, those that are less intensive in carbon emissions.
Learn more about the proposals of the Sustainable Tax Reform: http://estafaltandoverde.org.br/