O President Lula (PT), alongside the minister of Ministry and Planning, Simone Tebet, They intend to review the special tax regime. Simples Nacional, This is aimed at small and medium-sized enterprises. The idea is that tax reform would help balance public accounts, generate more revenue for the government, and reduce tax expenditures in Brazil.

O Simples Nacional It is the tax levied on micro and small businesses operating in the MEI (Individual micro-entrepreneur). It is a reduced tax regime in effect since 2006 and aims to reduce bureaucracy and, as the name suggests, create a simple and unified way to collect taxes nationally. Today, the Simples Nacional This applies to companies with a gross annual ceiling of R$4.8 million. 

However, there are some issues raised by the government and experts. The first is that the regime creates a hole in government accounts, which fail to collect up to R$125 billion annually. Another point is that experts believe that... Simples Nacional This could discourage the growth of companies that would otherwise avoid leaving the small business category.

Then comes the proposal to revise the Simples Nacional. Some of the ideas include reviewing the revenue ceiling, understanding how people work within their own companies, and seeing for whom it actually makes sense to follow the tax regime – and who could help boost Brazil's tax revenue.

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How to avoid paying Simples Nacional taxes? People find "workarounds".“

O Simples Nacional This is for small and micro-enterprises that invoice up to R$ 4.8 million annually (an average of up to R$ 400,000 per month). The higher the revenue, the higher the tax rate charged – never exceeding the rate of 33%. However, to reduce this rate, many people prefer to "dilute" their revenue across several different CNPJs (Brazilian tax identification numbers). They then open companies in the names of relatives to perform the same function.

The practice may even work, but it is considered tax evasion and is criminal. If the person is audited and it is found that they have several CNPJs (Brazilian tax identification numbers) that perform the same function (the tax authorities call this a "de facto economic group"), they may lose the right to own companies in the country. Simples Nacional, ...paying fortunes for tax evasion and even going to jail.

To assess whether companies are actually part of the same economic group, the tax authorities will evaluate whether they carry out the same activity, are from the same family nucleus, have the same trade name and corporate purposes, and whether they share the same lawyer, technical support, accounting, clients, etc.

Why will there be a review of the Simples Nacional (Brazilian simplified tax system)?

The main objective of the review of Simples Nacional It's not about eliminating the tax or zeroing out the tax incentives for small businesses, but about improving them, as the minister said. Tebet à Folha de São Paulo"There are tax expenditures that don't need to be eliminated, but improved. The Simples Nacional (Simplified National Tax System), in relation to the amounts involved. What is considered Simples Nacional in Brazil? Who is a micro-entrepreneur? That's a secondary analysis in the redesign. We're not going to eliminate it, but improve it and streamline it a bit more, because that also generates revenue."“

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The minister estimated that the Simples Nacional Today, this corresponds to approximately 27% or 28% of the tax incentives (or tax expenditures) of the Revenue Service. According to official tax authority data... Statement of Tax Expenditures attached to the Budget, show a slightly smaller reality: 23,94% in 2024 and 22,25% in 2025. 

The idea of Tebet It's not about eliminating that number entirely, but she believes the benefit has been "excessively expanded" and now it will be necessary to understand what still makes sense and what needs to be changed. Among the minister's proposals are:

• Increased scrutiny of alleged fraud;
• Review of the R$ ceiling of 4.8 million annually (R$ 400 thousand per month);
• “"Pejotização" of employees who stop paying other taxes;
• Reviewing which audiences benefit from tax cuts, or not.

Increase in tax bills (and for the entrepreneur)

As mentioned, the estimate is that the tax incentives of Simples Nacional, In 2024, these figures are equivalent to 23.94% of tax revenue forgone in Brazil. This value is equivalent to R$ 125 billion (in 2023, it was approximately 22%, equivalent to R$ 81.8 billion for the year).

Tax benefits were deemed, in 2017, as “expensive and distorting.” A World Bank report entitled A Fair Adjustment He said that some of the issues with the benefit are that it discourages companies from growing to avoid higher taxes, and it blocks companies "that could grow and generate more jobs for those who are currently unemployed, or for underemployed and less privileged workers.".

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Without company growth, the revenue fails to collect the taxes that would be applied to a medium-sized company, and the balance of payments tips downwards. Furthermore, the lack of job creation for third parties would also harm the economy by not only failing to stimulate economic activity, but also encouraging more people to open their own businesses for various activities.

Another argument in the report is that the problem is cyclical: small businesses refuse to become medium-sized businesses in order to pay less taxes. Medium-sized businesses, in turn, have to pay a higher amount, which, in addition to making competition unfair, hinders their growth into larger companies and consequently reduces tax revenue. 

But it's important to emphasize: the benefit of Simples Nacional This is essential for micro-entrepreneurs who, with higher tax burdens, would be completely unable to grow. The idea is not to make the business unviable for these companies, but rather to find a way to equalize it with businesses that have a ceiling close to R$ 4.8 million annually.