Brazil May Keep Financial Transactions Tax

by Jason Gorringe, Tax-news.com, London

15 June 2001

Brazil's Internal Revenue Secretary, Everardo Maciel announced recently that the Brazilian government may extend a tax on financial transactions by at least 18 months, in order to help boost revenue and keep its budget deficit at a manageable level.

The financial transactions tax, which was raised to 0.38% from 0.3% in March, is levied on everything from bank withdrawal to stock purchases, and the government hopes that extending its lifespan will bring in at least 18 billion reals (approximately $7.4 billion) in annual revenue. The government is trying to keep its budget deficit under control as rising interest rates push up financing costs, and has said that the current tax will stay in effect until June 2002.

This announcement comes at a time when the OECD has praised the progress made by the country in economic terms. After a decade of free market reforms, the majority of which were developed and implemented by President Fernando Henrique Cardoso in his days as Finance Minister, Brazil has finally 'crossed a threshold to sustained growth,' according to the 116 page report. However, the report also notes that the country's high burden of foreign debt and dependence on foreign savings meant that it was still very vulnerable to external shocks.

Recommended