Senate rapporteur for the Goods and Services Contribution (CBS) Eduardo Braga (MDB-AM) has publicly stated that he disagrees with the preliminary 11.3% rate estimated for the new federal tax. According to the senator, it is essential to question the technicians responsible for the tax reform's numerical models to understand why the calculation resulted in such a high level.
Why Does Eduardo Braga Disagree with the 11.3% CBS Rate?
Senator Eduardo Braga stated that the preliminary figures presented in the tax reform studies exceed the ceiling the Senate considers acceptable to maintain fiscal neutrality. For the Senate's CBS rapporteur, an 11.3% rate would place excessive pressure on the productive sector and final consumer prices, contradicting the promise that the tax transition would not increase overall government revenue.
Braga argues that the model must undergo a rigorous review before the text advances to a definitive vote in the Constitution and Justice Committee (CCJ). The senator's stated goal is to hear directly from the Ministry of Finance team and the Extraordinary Secretariat for Tax Reform to verify which exceptions, preferential regimes, or tax evasion estimates inflated the benchmark rate.
The disagreement highlights the political friction between the Executive branch's need to secure federal revenues and the Legislative branch's concern over the public fallout of a high nominal tax rate. At the Ministry of Finance, the pursuit of technical rigor in revenue collection—a theme recently defended by executive secretary Dario Durigan regarding public accounts adjustment—runs up against senators' political resistance to validating higher taxes.
What Is the CBS and How Does It Impact the Value-Added Tax (VAT)?
The Goods and Services Contribution is a federal tax created to replace PIS and Cofins under the Dual VAT model. The other half of this system is the Goods and Services Tax (IBS), managed jointly by states and municipalities to replace ICMS and ISS. The final amount charged to companies and consumers is the direct sum of these two legs.
If the CBS reaches 11.3% and the IBS maintains state projections of approximately 15.2%, Brazil's total VAT will jump to around 26.5%, placing the country among the highest in the world for this taxation format. It is precisely this sum that has triggered alarms in the National Congress.
The financial engineering of the CBS is based on the principle of full non-cumulativity: the rate applies at each stage of the production chain, but allows full credit for taxes paid in previous stages. However, the proliferation of special regimes, exemptions for basic food baskets, and deductions for sectors such as health and education force the standard rate to rise to compensate for tax relief granted to specific segments.
Which Stock Sectors Win and Lose If the Rate Is Capped?
The level at which the benchmark rate is set directly affects the operating margins of publicly traded companies and the attractiveness of different sectors on the B3. Labor-intensive sectors with long service chains tend to suffer more from high rates, while manufacturing gains efficiency from accumulated tax credits.
Few credits to offset; payroll costs do not generate credits and raise final prices.
Broad input credits and full tax relief on exported goods.
Sensitive to purchasing power; passing on 11.3% could slow sales.
Service providers—such as technology companies, diagnostic medicine, education, and consultancies—have a cost structure dominated by payroll, an item that does not generate tax credits. If the 11.3% rate is confirmed without smooth transition mechanisms, these companies will need to raise prices to preserve margins and cash generation.
On the other hand, heavy industry and exporters benefit from investment tax relief and the elimination of cascading effects. Because exports are immune to the CBS, commodity-focused companies can secure agile credit refunds, increasing the net return on invested capital.
What Does Senate Resistance Signal for Inflation and the Selic Rate?
The attempt to cap the rate at lower levels exposes a major macroeconomic dilemma: if Congress forcefully cuts the CBS without reducing preferential regimes, federal revenue will decline, widening the public deficit. If the government passes on the full 11.3% rate, there will be an initial shock to service price tables, fueling current inflation.
Because passing on tax costs drives up service sector inflation, this uncertainty alters the long-term projections captured in the economic agenda and the Focus Report. When service inflation remains under pressure, the Central Bank is forced to keep the Selic rate at restrictive levels to anchor market expectations.
The environment in Congress already demonstrates legislative volatility, as seen in the maneuvers surrounding the Security PEC approved in the Senate. This turbulence suggests that matters with significant fiscal impact will face tough negotiations and frequent text changes before reaching their final wording.
Services and Retail Stocks: Monitor margins and pricing power. Companies with strong brands absorb the impact of the CBS better than highly indebted competitors.
IPCA+ Fixed Income: Uncertainty regarding tax pass-through recommends maintaining inflation protection in medium-term bonds, ensuring an attractive real yield while the Selic rate remains elevated.
Real Estate Funds (FIIs): The direct impact is smaller on brick-and-mortar FIIs with atypical leases, but the operating costs of building repairs and maintenance will rise with the CBS on services.
What Are the Next Steps for the Bill in Congress?
For investors monitoring the evolution of this impasse and adjusting their positions in the coming weeks, the bill's progress will require attention to specific legislative triggers:
Public hearings in the CCJ — Follow the testimony of Ministry of Finance economists called by Eduardo Braga to justify the 11.3% rate.
Presentation of the official report — Watch whether the rapporteur will propose a legal cap for the CBS rate in the substitute text.
Senate floor vote — Check whether new sectors will be excluded or included in the list of reduced rates, a factor that alters the standard rate.
Until the final report is presented and voted on by the Senate, the financial market will continue treating the 11.3% rate as a negotiable maximum estimate. The prospect of a rate cut signals that the fiscal battle over tax reform is far from over.
