The Brazilian government is considering cutting taxes on holdings of government debt and other securities in an attempt to attract higher levels of foreign investment.
One measure under consideration would exempt foreign investors from paying the 15% capital gains tax. Other proposals, if approved, could cut income taxes and the Provisional Contribution on Financial Transactions, known as the 'check tax.'
The government is also keen to allow direct investment by foreigners into bonds. Presently, foreign investors may only buy domestic Brazilian debt through investment funds.
According to Planning Minister Paulo Bernardo, the discussions within the government on the new proposals are currently at an "advanced stage," and he told reporters that he expects President Luiz Inacio Lula da Silva to approve the measures "soon."
A study by the National Association of Financial Market Institutions (ANDIMA) last year suggested that cutting taxes on bonds for foreign investors could increase investment in the instruments from the current level of US$4.57 billion to US$13.71 billion.
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