BRASILIA (Reuters) – Lawmakers in Brazil’s lower house of Congress approved a bill on Tuesday that includes regulations needed to implement a constitutional tax reform, following a Senate vote to approve the bill. The proposal will now head to President Luiz Inacio Lula da Silva for his signature.
The bill sets rules needed to consolidate five existing taxes into a single consumption levy, also known as a value-added tax (VAT), with separate federal and regional rates. It also provides details on a new tax on products considered harmful to human health or the environment, such as cigarettes and alcoholic beverages. Lawmakers in the lower house added sweetened beverages back to the list after the senators removed it.
The overall consumption tax rate will be set at 26.5%, according to Reginaldo Lopes, bill rapporteur in the lower house.
The eagerly anticipated tax reform was approved by lawmakers last year and is a central pillar of Lula’s plans to boost productivity and economic growth in Latin America’s largest economy. Previous governments have attempted and failed to implement a tax reform of their own.
Lula’s government has also sent to lawmakers a separate bill, which still requires Senate approval, regulating how the VAT would be managed at the state level.