By Lise Alves, Senior Contributing Reporter
SÃO PAULO, BRAZIL – The Brazilian government’s new economic team announced the first measures which they hope will reduce the country’s primary deficit and put the economy back into the path of sustainable growth. Finance Minister, Joaquim Levy, announced on Monday, the government will increase taxes on fuels, imports and financial operations, with the goal of obtaining an extra R$20.6 billion in revenues.
“We are taking a series of actions to re-balance public accounts with the objective of increasing the confidence and understanding of economic agents, so that the economy can recover under new conditions,” said Levy to reporters as he announced the measures.
According to the Minister the hike in taxes in fuels will mean an increase of R$0.22 per liter in gasoline and R$0.15 per liter in diesel prices at distributors. The increase will generate an extra R$12.2 billion in revenues this year alone.
The government also decided to increase PIS and Confins taxes (social integration and social security taxes payed by companies) on imports from 9.25 percent to 11.75 percent. According to Levy the measure is to counteract the courts’ decision to exempt imports from federal sales taxes.
In regards to the Imposto sobre Operações Financeiras – IOF (Tax over Financial Operations) taxes for consumers trying to obtain credit will increase from 1.5 percent to 3 percent per year. Levy said that his economic team is trying to adjust public accounts with ‘the least possible sacrifice’ and that the measures will tend to lower the long-term interest rate curve.
“The world has changed, and Brazil is changing,” said Levy. “We are taking actions to reach, in the best manner possible, what is necessary to obtain the path to growth.”
For this year the government has established a primary surplus of 1.2 percent of GDP, equivalent to R$66.3 billion for the federal, state and municipal governments as well as state-owned companies.