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Brazil Confident Of Achieving Budget Surplus Next Year

by Mike Godfrey, Tax-News.com, Washington

23 November 2012


The Brazilian government is counting on stronger tax receipts from businesses and consumers to meet its fiscal target for 2012, although it is pushing certain expenditures forward into 2013 in order to do so.

Speaking on Brazilian television, Finance Minister Guido Mantega said that as much as BRL42bn (USD20.7bn) in spending will be omitted from this year's budgetary calculation, to help meet its target of a 3.1% of gross domestic product surplus for 2012. It is a ploy which has been used by the Brazilian government before, but has not been endorsed by multilateral institutions which scrutinize national budgets, like the International Monetary Fund (IMF).

Budget targets have slipped this year mainly due to a slew of fiscal stimulus measures provided to key industries during 2012 to inject growth into the nation's economy.

Back in February 2012, when the nation released its 2012 Budget, the government had targeted an economic growth rate of 5%. However, the Brazilian economy unexpectedly slumped during the year prompting the government to introduce tax cuts on household goods and vehicles to support local industry and boost consumer consumption.

The government also used tax policy to help devalue the country's currency, the real, with targeted financial transactions tax measures.

Despite these measures, the government expects the economy to expand by just 2% of GDP this year, according to forecasts released in September 2012, well below pre-crisis growth rates.

Mantega anticipates that the economy will pick up strongly in 2013, supported by the extension of payroll tax cuts to a total of 40 industries, announced in September, and new measures for 2013, announced in October, to support the domestic car manufacturing industry, which are tied to innovation.

TAGS: tax | economics | fiscal policy | gross domestic product (GDP) | budget | Brazil | currency | inflation

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