Brazil’s president vetoes controversial tax forgiveness for churches

Brazil’s president vetoes controversial tax forgiveness for churches

In this May 25, 2020, file photo, Brazil's President Jair Bolsonaro, wearing a face mask amid the coronavirus pandemic, stands among supporters as he leaves his official residence of Alvorada palace in Brasilia, Brazil. (Credit: Eraldo Peres/AP.)

On Monday, Brazilian President Jair Bolsonaro partially vetoed a bill to forgive churches’ tax debts with the government. The measure would force the Brazilian government to give up an amount of at least $165 million, mostly benefiting Evangelical churches.

SÃO PAULO – On Monday, Brazilian President Jair Bolsonaro partially vetoed a bill to forgive churches’ tax debts with the government. The measure would force the Brazilian government to give up an amount of at least $165 million, mostly benefiting Evangelical churches.

The National Conference of the Bishops of Brazil (CNBB) released a statement on Saturday to confirm that the Catholic Church hasn’t taken part in the “elaboration, articulation, and discussion” of that bill.

Evangelical congressmen are an important part of Bolsonaro’s coalition. His administration claimed that he couldn’t approve the debt forgiveness due to “unavoidable juridical obstacles” posed by the bill. According to the Presidency’s General Secretariat, the project’s “eventual sanction could imply a crime of responsibility by the President of the Republic.”

Bolsonaro insisted, however, that he supports the idea of “non-taxation of temples of any religion,” and even called on the Congress to overturn the veto. Members of the Evangelical bloc in Congress claimed on Monday night that they have enough votes to do it.

In Brazil, the Constitution says churches are generally tax exempt, unless they make a profit. According to a story published by the news website UOL, the Brazilian revenue agency has over the past few years detected some churches maneuvering to pay dividends and even salary incentives based on the number of churchgoers attracted by particular ministers – without paying the taxes that are owed from such activities.

In general, that’s not the case of the Catholic Church.

“If a church has a large tax debt, it’s probably involved in commercial initiatives. I don’t see why it shouldn’t pay taxes in a situation like that,” said Francisco Julho de Souza, a business manager who was the CNBB’s treasurer for 17 years.

De Souza explained that Catholic business operations such as publishing houses or hospitals usually have tax immunity because all profits are redirected to social work.

“Of course, they need to provide evidence of all investments of that kind in order to avoid undeserved taxation,” he said.

De Souza says the Catholic Church in Brazil has a profound consciousness of the need to properly manage its patrimony and its finances.

“The Church is well managed in the country. Certainly, there are a few dioceses and parishes facing financial difficulties, but they’re exceptions,” he said. “Large debts normally involve wrongful deeds.”

In its statement, the CNBB said that a project of such “a complex nature” as the proposed tax debt forgiveness shouldn’t be “incidentally discussed”, considering the “risk of emerging particular interests which taint the debate itself.”

“It’s necessary to understand the reach of the religious entities’ tributary characteristics and the State must definitely embrace their rights without abandoning its duty to fight eventual abuse from any organization,” the statement says.

The debt forgiveness measure has been proposed by Congressman David Soares, who is the son of Romildo Soares, the founder of the Brazilian Neo-Pentecostal megachurch International Grace of God Church (IGGC).

According to a story published by the newspaper O Estado de São Paulo in April, the IGGC owes at least $27 million in taxes to the government. On April 27, Bolsonaro and David Soares met with an official of the revenue service to discuss the church’s debt. The newspaper claimed Bolsonaro asked the official to “solve the [IGGC] problem,” enraging his economic advisors.

Bolsonaro also vetoed an article of the bill that completely exempted churches from paying taxes on their profits.

“I must admit that, if I were a Congressman or a senator, when the veto is analyzed till October, I’d vote for to overturn it,” Bolsonaro posted on his social media, in a move to placate his Evangelical constituency over his decision.

De Souza said the current tax immunity for the Brazilian churches is “more than sufficient” for their economic survival. “I don’t think that debt forgiveness is necessary. I’d be against it even if it was beneficial to CNBB, which is not the case,” he told Crux.

De Souza said that most churches are funded by poor members, who contribute with them with great difficult.

“That money is not only public, in a certain sense, but it’s also sacred. You cannot betray the faith of the people. I really disagree with changing a law in order to forgive tax debts,” he said.

Despite the Church’s problems with the proposed legislation, the Brazilian episcopate also advocates for fiscal changes regarding religious institutions.

According to the Bishop Joel Amado, the CNBB’s secretary-general, the revenue service has been historically hostile to economic activities carried out by churches, “as if the sources of income of such organizations had to be restricted to the churchgoers donations and to the rent of their properties.”

Amado noted that churches own small giftshops, bookstores or hostels all over the world and it’s considered something natural, except in Brazil.

“It’s important that the tax regime guarantees such initiatives for religions organizations, avoiding any fiscal repercussion,” he told Crux.

Amado said that although the Church considers it wrong to unconditionally forgive all the tax cases currently under investigation, “it’s also incorrect to assume as a principle that our prerogatives constitute some kind of unmotivated ‘privilege’. The Church has always been the first to defend fair norms and the fight against abuse and fraud.”

This story has been updated.

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