Experts see MEI as having a high cost and recommend reducing benefits; government wants to expand limit and hiring

Paraíba fair for creative entrepreneurs in João Pessoa
Teeteto/Thiago Nozi
The individual micro-entrepreneur (MEI) presents a high cost to the public coffers, generating a loss that could reach hundreds of billions of reais in decades, and therefore the current rules must be revised - in order to reduce existing benefits to maintain the "sustainability" of Social Security.
The recommendation was made by Social Security specialist Rogério Nagamine in a study published in last month by the Public Policy Debate Center (CDPP), a non-profit, independent and non-partisan organization.
It goes in the same direction as a report published in 2022 by the Public Policy Monitoring and Assessment Council (CMAP), an interministerial collegiate coordinated by the former Ministry of Economy. The body remains active to this day in the Lula government, under the coordination of the Ministry of Planning - the recommendations are not always taken forward. (see below)
The topic is in the spotlight after the Minister of Finance, Dario Durigan, stated last week that the government will send a bill to the Legislature in the opposite direction, to expand the existing benefit.
The idea is to correct the qualifying limit to a value close to R$ 130 thousand by 2028. Durigan had already said that the government also agrees with the hiring of one more employee per MEI.
➡The high cost of the MEI is one of the factors that put pressure on public sector debt which, according to the concept of the International Monetary Fund (IMF), already exceeds 90% of GDP - well above that of emerging nations, and is also higher than the average of Eurozone nations.
Minister of Finance says that the government will propose an increase in the MEI limit
What is the MEI
Created at the end of 2008, the individual micro-entrepreneur is included in Simples Nacional and if It is based on a simple regime to formalize those who work on their own, such as freelancers and small businesses. Currently, there are around 16.6 million active MEIs in the country.
The MEI contributes to Social Security, but is exempt from other federal taxes and contributions, such as IRPJ, CSLL, PIS and Cofins. It will also remain exempt from future taxes on consumption resulting from the tax reform, such as the federal CBS and the IBS of states and municipalities.
The contribution generates the right to retirement benefits due to age, retirement due to disability or permanent incapacity, death pension, sickness benefit (temporary incapacity) and maternity pay. Even with a reduced contribution, the program has recorded, since its inception, a high default rate.
The MEI must make the Annual Simples Nacional declaration (DASN-SIMEI)
Disclosure/Sebrae
At the beginning of the program, in 2008, the rate charged was 11% for social security, a value that fell to 5% in 2011. There was also, at that time, a definition that this symbolic rate of 5% would become the social security floor for optional low-income insureds.
Under current rules, micro-entrepreneurs can hire up to one employee, and must have annual revenue of up to R$81 thousand. Bill 108, of 2021, which has already been approved by the Senate and is now being analyzed in the Chamber, proposes increasing the MEI limit from R$81,000 to up to R$130,000 per year, allowing, in addition to the other Simples Nacional bands, also the hiring of one more employee.
The changes to the rules are part of the government's negotiations with the president of the Chamber, Hugo Motta (Republicanos-PB), to approve changes in the scale 6x1.
Impact on public accounts
According to Social Security specialist, Rogério Nagamine, despite the good intention in creating the MEI, which is to increase formalization in the economy, there are signs that the program has accentuated the financial imbalance of the National Social Security Institute (INSS) - "already burdened by the rapid and intense population aging."
"There are also signs that the program is not necessarily generating formalization of workers, but migration of insured people from more balanced plans. from an actuarial point of view, such as formal employees, for more unbalanced schemes, such as MEI. There is a need for an urgent structural review of the program", assesses Nagamine, in the study.
Economist Rogério Nagamine
Reproduction/TV Globo
With the current rules, he estimated that the MEI should generate an actuarial deficit - that is, the projected long-term deficit in Social Security - of around R$711 billion in seven decades. If the revenue limit is increased to R$ 130 thousand per year, the gap will increase by around R$ 60 billion in this period, without considering the real gain in the minimum wage.
In view of these numbers, economist Rogério Nagamine recommends:
Limiting access to the MEI to low-income workers, defining specific criteria to characterize "low income";
Raising the MEI rate to 11% of the minimum wage (as it was until 2011); less, decreasing, the difference in urban retirement ages between men and women.
The 2022 CMAP report, in the last year of former president Jair Bolsonaro's government, also contained similar analyses.
The Council concluded, in 2022, that the MEI has fundamental importance in the formalization of micro-entrepreneurs and social inclusion, but added that the current design, with a 5% social security contribution, "in addition to not showing itself cost-effective in relation to the initial design, it also introduced a risk to the sustainability of the pension system due to the high built-in subsidies".
In the document, the government estimated an accumulated deficit of:
R$ 186.8 billion in 20 years;
R$ 437 billion in 30 years;
R$ 728.8 billion in 40 years; and
R$ 1.07 trillion in 75 years.
"Finally, it is observed that the estimated actuarial result for the MEI totals a deficit of R$ 435.7 billion", says the report. The official projection was made by the Social Security Secretariat, of the then Ministry of Labor and Social Security.
MEI actuarial deficit estimate
Reproduction of CMAP study
The CMAP document recommended:
Carry out studies to evaluate the adherence between the current rate (5%) of MEI contribution and its original value (contribution rate of 11%), in order to correct distortions between the rates in relation to the Simplified Social Security Plan (PSPS) and improve the sustainability of the system.
Propose legal and regulatory changes that introduce the obligation to send information (via eSocial) about all self-employed workers working on a contract basis (a situation permitted for all MEI) or providing services through assignment or rental of labor to the establishment (exceptional situation permitted for a restricted group of services).
What the Ministry of Finance says
The g1 contacted the Ministry of Finance and asked:
if the increase in the MEI limit does not go in the opposite direction of rebalancing public accounts;
what is the impact of the proposal on the loss of revenue;
if the project has to do with the electoral calendar; and
if the government does not consider that it would be important, at some point, to review the existing benefit for the MEI.
The Ministry of Finance, however, did not respond to questions. He only informed that the "subject related to the possible expansion range of the MEI is still under analysis, as technical studies are ongoing".
The Minister of Labor and Employment, Luiz Marinho, has already told journalists that the MEI cannot be used for labor fraud and that the micro-entrepreneur cannot have the characteristics of workers with a formal contract.
Minister of Labor and Employment, Luiz Marinho, says that the MEI cannot be used "as fraud labor force"
Disclosure/MTE
For the minister, there are situations in which this would happen - he cites as an example the case of a hospital that placed a tender to outsource some activity and the outsourced company hired MEIs as formal employees. According to the minister, this could "destroy" resources, such as Social Security, the FGTS and the S System.
Marinho said he hopes that the Federal Supreme Court (STF), which judges action on pejotization in the economy, does not allow this to happen.
"We cannot use the MEI as a labor fraud, it needs to be entrepreneurial. It is not the nurse, it is not the street sweeper. This is labor fraud, it is not the manager. The concept of debate about what PJ is and does not need to be clear, the Supreme Court has a responsibility not to commit the irresponsibility of allowing PJs to be hired as entrepreneurs. It has to characterize what an entrepreneur is," Marinho told journalists.

Source: G1