Brazil’s Government Registers Lowest Q1 Revenues in Six Years

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – With the reduction in production and consumption due to one of the worst economic crises Brazil has ever faced, federal revenues in the country during the first quarter of 2016 registered the lowest volumes of the past six years. According to Brazil’s Internal Revenue Service, federal revenues totaled R$313.014 billion during the first three months of the year, down by 8.19 percent in relation to the same period last year.

The government agency blames the steep decline in economic activity for the reduction of revenues at the beginning of the year, with industrial production falling by 11.8 percent, sales and services declining by 10.47 percent and imports registering a retraction of 33.62 percent in US dollars, during the period.

Not even the withdrawal of tax breaks from strategic sectors of the economy helped to compensate the decline in federal revenues. In the first three months of the year the government was able to collect an additional R$6.7 billion in revenues from sectors which had been benefited with tax reductions or even exemptions in the previous years.

According to the agency the reintroduction of the tax over fuel alone rendered the government an extra R$3.3 billion to the federal government in the first quarter of the year.

In relation to revenues obtained from social security deposits, the volume obtained from this segment by the federal government in the first quarter of this year was 0.03 percent lower than that registered in the first three months of 2015, due to the decrease in average wages.

The Internal Revenue Service also released data that shows that revenues from corporate income and CSLL (tax over net profit) taxes declined by R$7.7 billion from January thru March of 2016 due to the lower profits registered by companies operating in the country. Proceeds from tax over industrialized products (IPI) declined by R$3.2 billion due to the decline in industrial production.

With the continuing retraction of the economic activity, economic analysts predict that federal revenues from taxes will continue weak throughout the year, only improving if consumer confidence increases and industrial production recovers.