Brazil Announces Fiscal Agenda To Support Growth

by Mike Godfrey, Tax-News.com, Washington

20 February 2012

The Brazilian government will focus fiscal policy for the coming year on cutting government expenditure and promoting economic growth by reducing taxes, according to the latest budget and a statement from the nation's finance minister.

Brazilian authorities announced on February 16 that they would freeze the budget allocation at 2011 levels to achieve savings worth BRL55bn (USD32bn) this year, by effecting spending cuts across government ministries. This would allow the nation to generate a surplus of USD81bn this year to cut debt.

The budget centres around achieving economic growth of 4.5%, although measures released in December 2011 targeted a greater rate of 5%, to which the government remains committed.

Responding to recent reports that the government may increase tax on fixed-income investments, the nation's Finance Minister, Guido Mantega on February 15, 2012, dismissed the rumours, announcing instead that the government is considering further tax cuts to stimulate economic expansion. In 2011, the government exempted foreign purchases of corporate bonds with maturities of over four years, and local equities from the financial transactions tax, IOF. The IOF rate applicable to personal credit was also cut by 0.5% to 2.5%, and the industrial products tax on a number of home appliances, such as fridges, freezers and washing machines, was also reduced.

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