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The government wants to end the additional 10% FGTS fine paid by companies


The government wants to end the additional 10% of the labor termination fine on FGTS paid by companies. The 10% additional fine was created in the government of former president Fernando Henrique Cardoso to fund the gap left by the economic plans Summer (1989) and Collor I (1990).


Today, companies pay 50% of fines in termination of labor contracts: 40% stay with the worker and the other 10% go to the Federal Union, which transfers the funds to the FGTS fund. Per year, this 10% corresponds to R$ 5.4 billion paid by the companies.



By ending the “extra” fine - as it would need congressional endorsement - the government would be able to make room for spending and yet meet the spending ceiling, which is the limiting growth variance linked to the variation of the inflation. This is possible because the 10% fine enters the budget first as revenue and then as mandatory spending, as the Union is required to pay the FGTS.


The economic team tries to find ways to cut down on mandatory expenses (such as salaries, grants, and pensions) so as not to sacrifice costs and investments (called “discretionary” in technical jargon - "discricionariedade" in Portuguese).


The proposal for a very tight 2020 budget, which will be sent to Congress this week, foresees only R$ 85 billion for spending and investment - a level that is already considered too low for ministries to maintain the offer of programs and services.


A similar picture to what was experienced by the Government, with the aggravating fact that 2020 would already start in this situation. Today, this is the current level of the Budget, after blockages totaling R$ 34 billion. The so-called contingency put the ministries and agencies in critical condition, heading for a standstill, a framework that is called "shutdown". In this scenario, there is a risk of “disconnection” of services in many ministries, regulatory agencies and even the IRS, which is the main function is collecting taxes.


In recent weeks, the economic team's effort has been to look for mechanisms to revise mandatory spending and raise discretionary spending to around $ 100 billion next year. Otherwise, the risk of breach of the ceiling in 2020, four years after its expiry date, may occur.


The 10% surcharge compensates the FGTS for legal losses, but the economic area understands that the collection has already lost its objective. When the spending cap was instituted, the expense of passing on the additional fine was in the accounts. That way, it ended up entering the ceiling. With the elimination of the surcharge, the budget loses revenue, but also the obligation to transfer funds to the FGTS. Today, revenue from the fine and expense (transferred to the FGTS) only passes through the Budget, with no impact on the result of public accounts.


Correction of the minimum wage by inflation


The Budget proposal foresees the correction of the minimum wage only by inflation and does not consider salary adjustment of civil servants. Sources reported that the forecast of mandatory expenditures in the budget bill should already anticipate a gain between R$ 10 billion and R$ 12 billion in savings from the approval of the pension reform.


On the eve of the sending of the 2020 Budget project, the climate is tense on the Esplanade with the possibility of larger spending cut in the proposal compared to this year's budget law. The biggest lock is the spending ceiling, which will only grow 3.37% next year (12-month inflation change through June this year), while mandatory expenses such as social security benefits are advancing at a faster pace.


The increase in other expenses has also taken space from costing and investments. Only the expenses with precatory (payments due by the Union after final judgment in court) should grow R$ 12 billion in 2020 (Source: Estadão).


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