Introduction
Brazil's government is preparing to support a bill that aims to implement a 10% reduction in federal tax breaks, potentially alleviating a contentious increase in the tax on financial transactions (IOF) proposed last month.Context
The bill, introduced by lower house lawmaker Mauro Benevides, outlines a 5% cut in tax benefits for 2025 and an additional 5% for 2026. This legislation will also impact fiscal and credit benefits, indicating a significant shift in the government's tax strategy.Developments
These measures could enable the government to boost revenue by 40 billion reais this year and another 40 billion reais in the following year, according to one source. This initiative comes in the wake of a government decree that raised the transaction tax on various credit, foreign exchange, and private pension operations to enhance revenues, a move that triggered lawmakers to act against it.The proposal, however, explicitly excludes the Manaus free trade zone and non-profit entities. Additionally, it will prevent the granting or renewal of tax, credit, and fiscal federal benefits.
Brazilian Finance Minister Fernando Haddad indicated earlier this week that a new set of fiscal measures would be unveiled next week, aimed at restoring balance to public accounts. The approval of these measures is considered critical for revisiting the controversial IOF tax hike.