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By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – In yet another blow to Brazil’s ailing economy, Brazilian President Dilma Rousseff is expected to present the country’s 2016 budget with a forecast of a significant primary deficit, according to reports by the country’s major daily newspapers, O Globo, Folha de S. Paulo and Estado de S. Paulo. President Rousseff met with cabinet members on Sunday to finalize the 2016 Budget Bill that will be sent to Congress on Monday (August 31st) for approval.

Rio de Janeiro, Brazil News.
President Dilma Rousseff is expected to send the 2016 Budget Bill for Congressional approval on Monday, photo by Wilson Dias/Agência Brasil.

After receiving harsh criticism, the government backed off the idea of reinstating a tax over financial transactions (CPMF). The government was discussing the reinstatement of the tax, stating that it would help fund the country’s health system. The idea received widespread criticism from the business community and Congressional representatives, some who stated that Brazil’s legislative body would never approve of the measure.

Finance Minister Joaquim Levy told reporters over the weekend that the CPMF was needed to reduce the huge decline in government revenues because of the unfavorable economic scenario.

One of the government’s biggest fears is that with the deficit forecast, international ratings agencies will withdraw the country’s investment grade, making it harder for the country to attract foreign investments and obtain foreign loans.

In an interview to Agencia Brasil, government Senate leader, Delcidio Amaral said that bill to be sent to Congress is likely to show the size of deficit facing the government next year. “The solution is to present the budget and then negotiate [with Congress],” he said. The original budget forecast, made at the beginning of the year, called for a primary surplus target of 0.7 percent of the GDP.

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9 COMMENTS

  1. How about reinstating Dividend Tax?
    It’s currently 0%… which means that the rich effectively pay no tax.
    In the USA and UK it varies around 38%.

    How about setting inheritance tax at a level similar to other developed nations?
    It’s currently 4% for most states and there isn’t a federal one. Not only that but may states, including SP and RJ, haven’t even bothered to collect it for many years! SP started this year; RJ has yet to.
    In the USA and UK it varies around 50%.

    Currently gift tax is also 4%, so if dividend tax is raised to a reasonable level the rich could simply swap gifts and continue to pay virtually no tax.

    Inheritance tax is designed to prevent the development of that plague of the 17th century, the landed gentry. That’s why Mitt Romney was so keen to abolish it.

    By comparison to the rich the poor of Brazil pay purchase taxes with take roughly 50% of their earnings.
    The middle class pay roughly 77%.

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