Section VI - tax Revenue Sharing

 

Article 157. The following shall be assigned to the states and to the Federal District:
I - the proceeds from the collection of the federal tax on income and earnings of any nature, levied at source on income paid on any account by them, by their autonomous government entities and by the foundations they institute and maintain;
II - twenty per cent of the proceeds from the collection of the tax that the Union may institute in the exercise of the powers conferred on it by article 154, I.

Article 158. The following shall be assigned to the municipalities:
I - the proceeds from the collection of the federal tax on income and earnings of any nature, levied at source on income paid on any account by them, by their autonomous government entities and by the foundations they institute and maintain;
II - fifty per cent of the proceeds from the collection of the federal tax on rural property, concerning real property located in the municipalities, or the totality of the proceeds, in case the municipality exercizes the option mentioned by article 153, paragraph 4, III;

Clause II, text in purple appended by CA 42, December 19th 2003.

III - fifty per cent of the proceeds from the collection of the state tax on the ownership of automotive vehicles licensed in the municipalities;
IV - twenty-five per cent of the proceeds from the collection of the state tax on transactions regarding the circulation of goods and on rendering of interstate and intermunicipal transportation services and services of communication.
Sole paragraph - The revenue portions assigned to the municipalities, as mentioned in item IV, shall be credited in accordance with the following criteria:
I - at least three-fourths, in proportion to the value added in the transactions regarding the circulation of goods and the rendering of services carried out in the territory of the municipalities;
II - up to one-quarter, in accordance with the provisions of a state law or, in the case of the territories, of a federal law.

Article 159. The Union shall remit:
I - of the proceeds from the collection of taxes on income and earnings of any nature and on industrialized products, forty-seven per cent as follows:
a) twenty-one and a half of one per cent to the Revenue Sharing Fund of the States and of the Federal District;
b) twenty-two and a half of one per cent to the Revenue Sharing Fund of the Municipalities;
c) three per cent, for application in programs to finance the productive sector of the North, Northeast and Centre-West Regions, through their regional financial institutions, in accordance with regional development plans, the semi-arid area of the Northeast being ensured of half of the funds intended for that Region, as provided by law;
II - of the proceeds from the collection of the tax on industrialized products, ten per cent to the states and to the Federal District, in proportion to the value of the respective exportations of industrialized products.
III - of the proceeds from the colection of the contribution of intervention in the economic order established in article 177, paragraph 4, 29% (twenty-nine percent) to the States and the Federal District, distributed as defined by law, with due regards to the destination as provided by the clause II, c, of the mentioned article;

Clause III added by CA 44, June 30th 2004.

Paragraph 1 - For purposes of calculating the amount to be remitted in accordance with the provisions in item I, the portion of the collected tax on income and earnings of any nature assigned to the states, to the Federal District and to the municipalities shall be excluded, as provided by articles 157, I, and 158, I.
Paragraph 2 - No federated unit may be allocated a portion in excess of twenty per cent of the amount referred to in item II, and any excess shall be distributed among the other participants, maintaining, for the latter, the apportionment criterion established therein.
Paragraph 3 - The states shall remit twenty-five per cent of the funds they may receive as provided by item II to the respective municipalities, observing the criteria established in article 158, sole paragraph, I and II.
Paragraph 4. Of the amount determined by clause III which belongs to each State, twenty-five percent shall be remitted to the respective municipalities, in the manner established by the law mentioned in said clause.

Paragraph 4 added by CA 42, December 19th 2003.

Article 160. It is forbidden to withhold or to make any restriction to the remittance and use of the funds assigned in this section to the states, to the Federal District and to the municipalities, including any tax additions and increases.
Sole paragraph - The prohibition mentioned in the present article does not prevent the Union and the States from conditioning the remitting of funds to:
I - the payment of credits, including those owned by the autarchies;
II - the fullfilment of the provisions of article 198, paragraph 2, II and III.

Sole paragraph amended by CA 29, September 13th 2000.

Article 161. A supplementary law shall:
I - define the added value for the purposes provided by article 158, sole paragraph, I;
II - establish rules for the remittance of the funds referred to in article 159, especially the criteria for the sharing of the funds set forth in its item I, seeking to promote social and economic balance among states and among municipalities;
III - provide for the monitoring, by the beneficiaries, of the calculation of the quotas and release of the participations set forth in articles 157, 158 and 159.
Sole paragraph - The Federal Court of Accounts shall calculate the quotas referring to the participation funds mentioned in item II.

Article 162. The Union, the states, the Federal District and the municipalities shall announce, on or before the last day of the month following that of collection, the amounts of each of the tributes collected, the funds received. the tax sums remitted and to be remitted and the numerical expression of the apportionment criteria.
Sole paragraph - The data announced by the Union shall be discriminated by state and by municipality; those of the states, by municipality.

CHAPTER II - PUBLIC FINANCES

 

SECTION I - GENERAL RULES

 

Article 163. A supplementary law shall make provisions for: I - public finances;
II - foreign and domestic public debt, including the debt of the autonomous government agencies, foundations and other entities controlled bv the Government;
III - granting of guarantees by government entities;
IV - issuance and redemption of public debt bonds;
V - financial supervision of the direct and indirect public administration;

Clause V amended by CA 40, May 29th 2003. Original text read: "V - supervision of financial institutions;"

VI - foreign exchange transactions carried out by bodies and agencies of the Union, of the states, of the Federal District and of the municipalities;
VII - compatibility of the functions of the official credit institutions of the Union, safeguarding all the characteristics and full operational conditions of those intended for regional development.

Article 164. The competence of the Union to issue currency shall be exercised exclusively by the central bank.
Paragraph 1 - It is forbidden for the central bank to grant, either directly or indirectly, loans to the National Treasury and to any body or agency which is not a financial institution.
Paragraph 2 - The central bank may purchase and sell bonds issued by the National Treasury, for the purpose of regulating the money supply or the interest rate.
Paragraph 3 - The cash assets of the Union shall be deposited at the central bank, those of the states, of the Federal District, of the municipalities and of the bodies or agencies of the Government and of the companies controlled by the same, at official financial institutions, excepting the cases established in law.

SECTION II - BUDGETS

 

Article 165. Laws of the initiative of the Executive Power shall establish:
I - the pluriannual plan;
II - the budgetary directives;
III - the annual budgets.
Paragraph 1 - The law which institutes the pluriannual plan shall establish, on a regional basis, the directives, objectives and targets of the federal public administration for the capital expenditures and other expenses resulting therefrom and for those regarding continuous programmes.
Paragraph 2 - The law of budgetary directives shall comprise the targets and priorities of the federal public administration, including the capital expenditures for the subsequent fiscal year, shall guide the drawing up of the annual budget law, shall make provisions for alterations in tax legislation and shall establish the investment policy for the official development financing agencies.
Paragraph 3 - The Executive Power shall, within thirty days after the closing of each two-month period, publish a summarized report on budget implementation.
Paragraph 4 - The national, regional and sectorial plans and programmes set forth in this Constitution shall be drawn up in compliance with the pluriannual plan and shall be examined by the National Congress.
Paragraph 5 - The annual budget law shall include:
I - the fiscal budget regarding the Powers of the Union, their funds, bodies and entities of the direct and indirect administration, including foundations instituted and maintained by the Government;
II - the investment budget of companies in which the Union directly or indirectly holds the majority of the voting capital;
III - the social welfare budget, comprising all direct and indirect administration entitles or bodies connected with social security, as well as funds and foundations instituted and maintained bv the Government.
Paragraph 6 - The budget bill shall be accompanied by a regionalized statement on the effect on revenues and expenses, deriving from exemptions, amnesties, remissions, subsidies and benefits of a financial, tributary and credit nature.
Paragraph 7 - The functions of the budgets set forth in paragraph 5, I and II, of the present article, compatible with the pluriannual plan, shall include the function of reducing interregional inequalities, according to populational criteria.
Paragraph 8 - The annual budget law shall not contain any provision extraneous to a forecast of revenues and to the establishment of expenses, such prohibition not including authorization to open supplementary credits and to contract credit transactions, even if by advance of revenues, under the terms of the law.
Paragraph 9 - A supplementary law shall:
I - make provisions for the fiscal year, effectiveness, terms, drawing up and organization of the pluriannual plan, of the law of budgetary directives and of the annual budget law;
II - establish rules for the financial and property management of the direct and indirect administration, as well as conditions for the institution and operation of funds.

Article 166. The bills regarding the pluriannual plan, the budgetary directives, the annual budget and the additional credits shall be examined by the two Houses of the National Congress, in accordance with their common regulations.
Paragraph 1 - It is incumbent upon a permanent joint committee of Senators and Deputies to:
I - examine and issue its opinion on the bills referred to in the present article and on the accounts submitted annually by the President of the Republic;
II - examine and issue its opinion on the national, regional and sectorial plans and programmes established in this Constitution, and exercise budgetary monitoring and supervision, without affecting the operation of the other committees of the National Congress and of its Houses, created in accordance with article 58.
Paragraph 2 - Amendments shall be submitted to the joint committee, which shall report on them. and shall be examined, in accordance with the regulations, by the Plenary Session of the two Houses of the National Congress.
Paragraph 3 - Amendments to the bill of the annual budget or to the bills which modify it may only be approved if:
I - they are compatible with the pluriannual plan and with the law of budgetary directives;
II - they specify the necessary funds, allowing only those resulting from the annulment of expenses, and excluding those which apply to:
a) allocations for personnel and their charges;
b) debt servicing;
c) constitutional tax transfers to the states, the municipalities and the Federal District; or
III - they are related:
a) to the correction of errors or omissions; or
b) to the provisions of the text of the bill of law.
Paragraph 4 - Amendments to the bill of budgetary directives may not be approved if they are incompatible with the pluriannual plan.
Paragraph 5 - The President of the Republic may send a message to the National Congress to propose modifications in the bills referred to in the present article as long as the joint committee has not started to vote on the part for which an alteration is being proposed.
Paragraph 6 - The bills of the pluriannual plan law, of the law of budgetary directives and of the annual budget law shall be forwarded by the President of the Republic to the National Congress, under the terms of the supplementary law referred to in article 165, paragraph 9.
Paragraph 7 - The other rules regarding legislative procedure shall apply to the bills mentioned in this article, as long as they are not contrary to the provisions of this section.
Paragraph 8 - Any funds which, as a result of a veto, amendment or rejection of the bill of the annual budget law, have no corresponding expenses, may be allocated, as the case may be, by means of special or supplementary credits, with prior and specific legislative authorization.

Article 167. The following are forbidden:
I - to begin programmes or projects not included in the annual budget law;
II - to incur expenses or to assume direct obligations which exceed the budgetary or additional credits;
III - to carry out credit transactions, which exceed the amount of capital expenses, excepting those authorized by means of supplementary or special credits with a specific purpose and approved by an absolute majority of the Legislative Power;
IV - to bind tax revenues to an agency, fund or expense, excepting the sharing of the proceeds from the collection of the taxes referred to in articles 158 and 159, the allocation of funds for the public actions and services of health, for the maintenance and development of education, as determined, respectively, by articles 198, paragraph 2, 212 and 37, XXII and the granting of guarantees on credit transactions by advance of revenues, as established in article 165, paragraph 8, as well as in paragraph 4 of the present article;

Clause IV amended by CA 42, December 19th 2003. The CA permitted the binding of funds to health needs, as it did with education.

V - to open a supplementary or special credit without prior legislative authorization and without specification of the corresponding funds;
VI - to reassign, reallocate or transfer funds from one programming category to another or from one agency to another without prior legislative authorization;
VII - to grant or use unlimited credits;
VIII - to use, without specific legislative authorization, funds from the fiscal and social security budgets to supply a necessity or to cover a deficit of companies, foundations and funds, including those mentioned in article 165, paragraph 5;
IX - to institute funds of any nature without prior legislative authorization.
X - the voluntary transfer of funds and the granting of loans, including the cases of proceeds advance, by the Federal and State government and their financial institutions, for payment of expenditures with personal, retired and pensionists of the States, Federal District and municipalities;

Clause X added by CA 19, June 4th 1998.
XI - the utilization of proceeds from the social contributions subject of article 195, I,a, and II, for the realization of expenditures other than the payment of benefits of the general regime of social security established by article 201.

Clause XI added by CA 19, June 4th 1998.

Paragraph 1 - No investment whose execution exceeds one fiscal year may be implemented without prior inclusion in the pluriannual plan, or without a law to authorize such inclusion, subject to crime of malversation.
Paragraph 2 - Special and extraordinary credits shall be effective in the fiscal year in which they are authorized, unless the authorization act is enacted during the last four months of that fiscal year, in which case, reopened within the limits of their balances, such credits shall be incorporated into the budget of the subsequent fiscal year.
Paragraph 3 - The opening of extraordinary credit may only be allowed to meet unforeseeable and urgent expenses, such as those resulting from war, internal commotion or public calamity, observing the provisions in article 62.
Paragraph 4 - It is permitted to bind proper revenues generated by the taxes referred to in articles 155 and 156 and the funds mentioned in articles l57, 158 and 159, I, a and b, and II, to the granting of a guarantee or a counterguarantee to the Union, and to the payment of debits owed to the same.

Paragraph 4 added by CA 3, March 17th 1993.

Article 168. The funds corresponding to the budgetary allocations, including the supplementary and special credits, intended for the bodies of the Legislative and Judicial Powers and for the Public Prosecution and the Public Legal Defense, shall be remitted to them on or before the twentieth of each month, in twelfths, as provided by the supplementary law referred to in article 165, paragraph 9.

Article 168, text in purple added by CA 45, December 8th 2004.

Article 169. Expenditure with active and pensioned personnel of the Union, the states, the Federal District and the municipalities may not exceed the limits established in a supplementary law.

Article 169 was radically changed by CA 19, June 4th 1998. This CA changed much of the legislation regarding the civil service. This article imposed to States and municipalities the obligation to cut expenditures with salaries, retirement payments and pensions, as necessary to keep the ratio between expenses and revenues within certain limits. The supplementary law mentioned by this article is Suplemmentary Law 101, May 4th 2000, which became known as Fiscal Responsibility Law (Lei de Responsabilidade Fiscal).

Paragraph 1 - The granting of any advantage or increase of remuneration, the creation of offices or alteration of career structures, as well as admission of personnel, on any account, by bodies and entities of the direct or indirect administration, including foundations instituted and maintained by the Government, may only be effected:
I - if there is a prior budgetary allocation sufficient to cover the estimated expenditure with personnel and the increases resulting therefrom;
II - if there is specific authorization in the law of budgetary directives, excepting the public and the mixed-capital companies.

CA 19, June 4th 1998, changed the former Sole paragraph to paragraph 1, without changing text.
Paragraph 2. Elapsed the time set forth by the supplementary law mentioned by this article for compliance with the limits estabished by said law, the remittance of federal or State funds to the States, Federal District or municipalities which do not comply with the limits shall be immediately suspended.
Paragraph 3. For compliance with the limits established in accordance with this article, during the time determined by the supplementary law mentioned by the caption of this article, the Union, the States, the Federal District and the municipalities shall adopt the following measures:
I - reduction of at least 20% (twenty per cent) of expenditures with comissioned offices and trusting positions;
II - dismissal of non-tenured servants.
Paragraph 4. If the measures adopted in accordance with paragraph 3 do not suffice to assure compliance with the provisions of the supplementary law mentioned by this article, the tenured servants may loose their offices, provided that the justified normative act of each of the Powers specifies the functional activity, the body or administrative unity subject to reduction in personnel.
Paragraph 5. The civil servant who looses office as per paragraph 4 shall be entitled to an indemnization of one monthly remuneration per year in office.
Paragraph 6. The office subject to reduction in accordance of the former paragraphs shall be considered extinct, the creation of office, position or function with equal or similar assignments being forbidden for the next 4 (four) years.
Paragraph 7. Federal law shall provide for the general rules to be obeyed in the effectivation of the provisions of paragraph 4.

Paragraphs 2 to 7 added by CA 19, June 4th 1998. All these paragraphs had the goal of reducing the share of the budget spent with salaries of the civil servants. This problem affected more seriously some States and municipalities; even so, with support on these paragraphs, and to give an example, the Federal Government didn´t give any linear raise to the civil servants from 1995 to 2001. Most States followed the example and also didn´t grant any raise in salaries. In the smaller municipalities, most servants are still paid minimum salary, which has yearly adjustments. As a whole, most States and municipalities managed to comply with the supplementary law without being obliged to dismiss servants or extinguish offices.