Brazil gov’t to press Senate after election on dividend tax to fund welfare program -source

By Marcela Ayres and Bernardo Caram

BRASILIA (Reuters) -Brazil’s authorities desires to conclude voting on tax reform later this yr to spice up welfare support from 2023 on, if President Jair Bolsonaro wins re-election in October, an official supply mentioned.

In response to the supply with direct information of the matter, who spoke anonymously as a result of the plans are usually not public, the federal government hopes a brand new tax on company dividends would offer income for welfare support promised by Bolsonaro, who’s trailing leftist Luiz Inacio Lula da Silva within the polls.

The Decrease Home permitted a tax reform in September 2021, introducing a 15% tax on company dividends, that are presently exempt, however the Senate has but to vote on the invoice.

Earlier this month, Congress handed an enormous spending package deal that raised the money switch program for low-income households, referred to as Auxilio Brasil, from 400 to 600 reais ($116.02) for this yr solely. The expenditure was allowed to bypass the constitutional spending cap as a result of inflationary results of the conflict in Ukraine.

The Treasury has already said that the everlasting enlargement of this system would require 50 to 60 billion reais per yr. In response to the supply, the federal government remains to be trying into how this may be accommodated inside the spending rule subsequent yr.

HIGHER GROWTH

In response to the supply, the federal government sees Brazil rising by greater than 2% this yr, with enlargement more likely to attain 2.5%.

The projection comes after the Economic system Ministry just lately improved its forecast to 2% from 1.5%, on the again of stronger financial indicators, an enchancment within the job market and a rise in non-public investments.

The supply additionally said that the federal government was making ready a invoice to finish double taxation on U.S. firms, as preparation for Brazil becoming a member of the Group for Financial Co-operation and Improvement (OECD).

The invoice might be despatched to Congress subsequent week, the supply added.

One other ongoing initiative is a decree, which can be signed this Friday, to standardize a beforehand introduced 35% tax lower on industrial merchandise (IPI) after a Supreme Courtroom ruling created uncertainty attributable to broad exemptions.

The decree, earlier reported by Reuters, will make clear which merchandise are coated by the tax discount. The IPI tax is levied on firms manufacturing and importing merchandise, equivalent to fridges, automobiles, air conditioners and televisions.

($1 = 5.1714 reais)

(Reporting by Marcela Ayres and Bernardo Caram; Modifying by David Gregorio)