Status Of Brazilian Tax Reforms Uncertain

by Mike Godfrey, Tax-News.com, Washington

19 March 2008

Doubts have been expressed over the likely passage of proposed tax reforms through the Brazilian Congress this year, according to recent reports.

President Luiz Inacio Lula da Silva last month put forward proposals for the unification of several federal taxes into a single value-added tax.

The government reportedly hopes to secure approval for this, and several other economy-boosting measures, by the end of the year.

However, issues likely to complicate this process include municipal elections being held later this year, and the opposition's stance on presidential decrees, which have been relied upon to a great extent by successive Brazilian presidents.

It is thought to be unlikely that Lula will be open to surrendering any of his powers in this area, and observers have suggested that this could prove to be a sticking point in negotiations over other issues, including the planned tax reforms.

Although the business community has widely welcomed the move towards simplifying the country's tax system, the overall tax burden on them is still viewed as high.

This perception is unlikely to have been dispelled by a suggestion made on Tuesday by Brazilian Energy Minister, Edison Lobao that companies looking to explore new oil and gas fields in Brazil could face higher taxes.

However, the Minister sought to reassure the sector that the proposed changes were not likely to take effect in the short term, explaining, according to Reuters, that:

"This could be done, but in the future."

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