Brazil’s Congress Approves CPMF Tax with 2016 Budget

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – With only days to go before the start of a new year, Brazil’s Congress approved on Thursday the 2016 Budget which calls for the creation of a tax over financial transactions (CPMF tax) and establishes a lower primary surplus target, of 0.5 percent of the GDP.

Although the government’s budget proposal sent to Congress in August was revised to include a lower primary surplus target, Planning Minister, Nelson Barbosa said that the approved budget will help the country next year.

“This was the agreement which could be reached, and it was a good agreement,” stated Barbosa after the announcement of approval of the 2016 budget, stating that the government negotiated with Congress a way not to cut too much into social programs next year.

The reduction of the primary surplus target, from 0.7 percent to 0.5 percent of the GDP was seen as a defeat for Finance Minister Joaquim Levy, who emphasized that the more ambitious target, along with the CPMF tax, was essential for the recovery of Brazil’s economic growth.

“The success of the 2016 budget proposal will allow Brazil to once again grow, companies turn once again to investment plans and Brazilians to get on with their lives,” Levy told Congressional representatives in October during a Congressional Budget Hearing.

Part of the Rousseff administration, however, pressured the President and Congress to reduce the target so that important social programs, such as Bolsa Familia (family welfare program) and Minha Casa, Minha Vida (My Home, My Life), would not suffer cuts in investments.

With the approval of the 2016 budget, the Brazilian government guaranteed the entire budget for Bolsa Familia and a continuance, however slow, of the Minha Casa, Minha Vida program.