Brazil's Second Tax Reform Bill Clears The Senate-And Reveals The Real Fight Over Who Gets What

(MENAFN- The Rio Times) Brazil just took another big step toward overhauling one of the world's most tangled tax systems. The Senate approved the second implementing bill for Brazil's new dual VAT model-IBS for states and cities, and CBS for the federal level.

Lawmakers made several changes before sending the bill back to the Chamber of Deputies for further consideration. On paper, it's about rules and rates.

In practice, it's about trust, cash flow, and the eternal tug-of-war between governors, mayors, Brasília, and powerful sectors like fuels. The headline change sets the transition“reference rate” using the average ICMS and ISS collections from 2024 to 2026.

That sounds technical, but it matters: states and municipalities wanted the baseline anchored in fresh, audited numbers so their budgets don't whipsaw during the glide path to 2033.

Fuel taxation is the clearest example of the politics underneath. The bill moves ICMS on imported naphtha-an input that becomes gasoline-to the moment of import, not years from now.



That closes well-known leakages and shrinks room for fraud. It's also a sign of how the reform is being tightened sector by sector so the revenue math adds up.

Other pieces follow the same logic of smoothing the landing. The sub-national VAT (IBS) phases in gradually to 2033. People with disabilities keep tax relief on vehicles up to R$100,000.
Brazil Details Tax Transition to Bolster Reform Credibility
A selective excise on sugary drinks is phased in between 2029 and 2033. Companies can use ICMS credits earned through December 31, 2032 to offset future IBS or receive refunds in installments-relief for balance sheets that might otherwise seize up.

Finance, FX , and insurance get a defined rate path, starting at 10.85 percent in 2027 and reaching 12.5 percent by 2033. The machinery to run all this is as important as the rates.

A new IBS Governing Committee-54 members split evenly between states and municipalities, with a rotating chair and at least 30 percent women on the executive board-will collect, reconcile, and distribute revenues and standardize rules.

Startup funding of up to R$3.8 billion from 2025 to 2028 is earmarked to get it live. The story behind the story is credibility. Investors and households need to believe Brazil can move from constitutional promise to working system.

This bill tightens the screws where leakages lurked, clarifies who gets paid when, and keeps the calendar intact for a full switch by 2033-turning grand reform into practical reality.

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