The Brazilian government announced last week that it is to exempt investment funds from the bank transaction tax known as the CPMF, in a bid to encourage higher rates of savings and attract more investment in the nation’s capital markets.
"This measure to facilitate savings will put what is now only available to large-scale investors within the reach of everybody," Brazilian Treasury Secretary Joaquim Levy explained.
The CPMF financial transactions tax is currently charged at 0.38%, and brings in around 23 billion reals ($7.93 billion) per year.
It is applied when a wide range of securities, including government bonds, certificates of deposit and foreign exchange contracts are bought and sold. However, stock investments are already exempt from the tax.
The change has been prompted by Brazil’s rate of internal savings, which at 20% of GDP is considerably lower than many other nations.
By encouraging domestic investment, the country hopes to lessen its dependence on foreign capital to finance economic growth.
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