Brazil’s government is considering tax hikes that do not require congressional approval as part of an effort to balance this year’s budget, according to sources from the finance ministry. The move comes after the Treasury announced the possibility of implementing new revenue-generating measures to ensure the country meets its fiscal target for 2023: eliminating the primary deficit.
The potential tax increases could include levies on financial transactions (IOF) and import and export duties. These taxes can be adjusted via presidential decree, allowing the government to bypass the often lengthy congressional approval process. These changes, if necessary, may be included in the next bimonthly revenue and expenditure report, expected to be released later this month.
This comes after the government froze 15 billion reais ($2.68 billion) in federal expenditures in July, a move aimed at helping to meet the fiscal goal. Despite this freeze, the federal budget is still under pressure, prompting officials to explore new revenue options. The government is set to present its updated assessment of federal accounts on September 20.
A crucial factor in the government’s final decision on tax hikes will be the approval of compensatory measures for payroll tax exemptions, which have already been passed by Congress. The finance ministry is currently awaiting the green light on these measures, which include tapping into judicial deposits, collecting dormant bank account funds, and repatriating assets held overseas. However, even if these measures are approved, implementing them will not be straightforward, as new regulations and programs will need to be established.
These tax adjustments, aimed at closing the budget gap, are part of the government’s broader strategy to maintain fiscal discipline. However, they could face pushback from businesses and consumers already grappling with inflation and economic uncertainty.
With the budget deadline looming and the fiscal target at stake, Brazil’s finance ministry is working quickly to find solutions that will stabilize the nation’s finances while avoiding deeper cuts to public services. Further developments are expected in the coming weeks as the government navigates this critical juncture in its fiscal planning.
