The regulation of the tax reform on consumption will bring measures to prevent the increase in the price of medicines. A total of 383 substances, which also includes vaccines, will be exempt from Value Added Tax (VAT). In addition, 850 active ingredients will have their rate reduced by 60%.
In addition to vaccines against COVID-19, dengue, yellow fever, flu, cholera, yellow fever, polio and measles, the drugs that will be exempt from tax include substances such as insulin (used for diabetes) and the antiviral drug abacavir (used for HIV). Sildenafil citrate (used to treat erectile dysfunction) will also not be subject to tax.
Among the active ingredients with a reduced rate are omeprazole (treatment of reflux and digestive ulcers), the anxiolytic lorazepam, the high blood pressure medication losartan, metmorphine (used for diabetes), the anti-inflammatory, anti-allergic and antirheumatic prednisone and the medication for sexual impotence tadaphilia.
The complementary bill regulates the collection of Value Added Tax (VAT). This tax is made up of the Contribution on Goods and Services (CBS), collected by the federal government, and the Tax on Goods and Services (IBS), which is the responsibility of the states and municipalities. The government expects to approve the text by the end of July in the Chamber of Deputies and by the end of the year in the Senate.
According to the government’s proposal, the average tax rate will be 26.5%. If the general tax rate is reduced to 60%, medicines with the benefit will pay only 10.6% in tax.
Even with the regulations, the new tax system will take time to reach citizens’ pockets. The transition from current taxes to VAT will begin in 2026 and will only be completed in 2032. Only in 2033 will the system come into full effect.
End of cumulativity
In a press conference to explain the complementary bill, the extraordinary secretary of Tax Reform at the Ministry of Finance, Bernard Appy, said that approval of the proposal as submitted by the government will allow for “a significant reduction in the costs” of medicines. In addition to the reduction or exemption of rates, he highlighted that the end of cumulative taxation (cascading charges) will result in lower prices.
“Not only because of the rates, but today there is the cumulative effect that will no longer exist. When the medicine with [cobrança de] ICMS [Imposto sobre a Circulação de Mercadorias e Serviços, que vai deixar de existir] goes to a reduced rate, there is a big reduction, from 20% to 10% [na carga tributária]. Se [atualmente] already has a zero rate, continues to be exempt, but gains because there is no longer any cumulation,” said Appy. (Agência Brasil)
