Brazil May Introduce New Taxes To Finance Health Spending

by Mike Godfrey, Tax-News.com, Washington

22 May 2008

Speaking at the weekend, ahead of a government meeting on the matter, Jose Mucio Monteiro, Brazil's Minister for Institutional Affairs, revealed that the authorities are considering introducing new taxes and increasing others in order to finance spending on health.

According to a Reuters report, Mr Mucio revealed that a hike in levies imposed on tobacco was to be considered, as well as a 0.08% tax on financial transactions.

However, he was quoted by Reuters and national news sources as stating that:

"Nothing is decided yet, we are studying, evaluating. We'll decide in the meeting on Monday."

The proposed moves come in response to the government's failure late last year to push through an unpopular extension to the CPMF financial transactions tax (which created a revenue shortfall), coupled with a recent Senate vote to force the government to increase healthcare spending.

The failure by President Luiz Inacio Lula da Silva to renew the CPMF levy in December 2007 represented an embarassing political defeat for his administration.

Despite negotiations with the opposition to secure an extension of the levy - which would have brought in an estimated US$22 billion in revenue in 2008 - until 2011, the coalition government fell short of the 49 votes (out of 81) needed in the Senate for the tax to be renewed.

The 0.38% tax was imposed on various types of financial transactions, including cheques, transfers, and bank withdrawals, and revenue from it has traditionally been used by the government to fund spending on infrastructure and health projects.

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