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Brazil To Stimulate Economy By Cutting Taxes

by Mike Godfrey, Tax-News.com, Washington

18 December 2008


The Brazilian government has announced that it is set to implement a stimulus package, including tax cuts, worth BRL8.7bn (USD3.6bn) in a bid to spur economic growth.

The decision to implement the tax cuts, which was announced by the country's Finance Minister, Guido Mantega, has been designed to help the Brazilian economy to meet a growth target of 4% in 2009.

According to the Minister, the tax breaks will encourage growth by maximizing income for the country's low- and middle-income earners. They will also minimize the cost of financial transactions for businesses.

Under the regime, income taxes for those paying either 15% or 27.5% will be reduced to 7.5% and 22.5%, with companies able to benefit from a 1.5% cut to the current 3% rate of financial transaction tax.

In addition to this, car taxes will also be revised. A reduction will be given to the tax levied on cars with an engine capacity between 1 and 2 litres, whilst any car below the 1 litre mark will have the tax completely waived.

This particular measure has been devised in an attempt to try and revive Brazil's flagging car industry, which has been in rapid decline since October of this year.

The government also intends to inject around BRL10bn worth of its foreign exchange reserves into the country's banks.


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