The exclusive-Brazil government to support invoices reducing tax reductions by 10%, let’s say sources

By Lisandra Paraguassu and Ricardo Brito

Brasilia (Reuters) – The Brazil government is expected to support a bill offering a 10% reduction in federal tax alternatives, two sources said on Thursday, in a decision that could allow it to write a controversial increase in the financial transactions (IOF) proposed last month.

The bill, which was proposed by the Lower House legislator, Mauro Benevides, establishes a 5% reduction in the value of the tax advantages in 2025 and an additional decrease of 5% in 2026, according to the proposal. Legislation also applies to tax and credit benefits.

The measures would allow the government to increase income by 40 billion reais ($ 7.16 billion) this year and 40 billion Reais next year, one of the sources said.

The compromise follows an intense reaction on a government decree which increased the tax on transactions on a range of credits, currencies and private retirement operations to increase income, encouraging legislators to mobilize to overthrow it.

However, the proposal to reduce tax alternatives will not include the Manaus free trade area and non-profit entities, according to the bill.

It would also block concessions or renewal of federal tax, credit and tax benefits.

Brazilian Minister of Finance, Fernando Haddad, said earlier this week that the government would unveil a new set of budgetary measures next week aimed at balancing public accounts, their approval considered crucial to review a controversial IOF tax increase.

(1 $ = 5.5845 reais)

(Report by Lisandra Paraguassu and Ricardo Brito; writing by Andre Romani; edition by Brendan O’Boyle and Sonali Paul)