SAO PAULO/BRASILIA (Reuters) -Brazil’s government has agreed to present an alternative plan to the increase in the IOF tax on financial transactions in 10 days, lower house speaker Hugo Motta said on Thursday in a post on X.
The controversial measure signed last week by President Luiz Inacio Lula da Silva to raise revenue, and thereby limit an already substantial spending freeze aimed at meeting this year’s fiscal rules, triggered intense backlash after it immediately drove up the cost of credit for companies, contributions to pension funds and some foreign exchange operations.
Treasury Secretary Rogerio Ceron said at a press conference that there is still no defined solution and that discussions are yet to take place.
Ceron stressed, nonetheless, that without the IOF hike, “we have a very complex situation” in which to fund vital public policies.
“(Congress’) desire is to create a more definitive solution,” Ceron said, adding that there is now a sense of openness to structural discussions with lawmakers who, in the past, might not have been willing to engage.
Lula’s leftist administration has repeatedly emphasized its focus on rebalancing public accounts by eliminating tax distortions and what it sees as unjustified tax benefits, rather than cutting spending, which has notably increased since he took office.
However, several measures aimed at curbing tax expenditures sent to Congress have either been significantly watered down or have not even begun moving through the legislative process.
Motta earlier said that the Brazilian Congress is likely to overturn the government proposal to increase the tax on financial transactions if a legislative decree on the matter reaches the voting agenda.
“The mood in both (congressional) houses is to overturn the measure,” he told news outlet G1.
Congress is willing to discuss reforms, Motta told G1, adding that he believes the government has resorted to maneuvers to increase revenue.
“There is exhaustion in the Congress with measures that increase taxes, aim to raise revenue without structural discussion,” he said.
(Reporting by Isabel Teles in Sao Paulo and Marcela Ayres in Brasilia; Editing by Tomasz Janowski, Franklin Paul and Mark Porter)
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