Government relies on revenue to meet target; Congress resists

Government relies on revenue to meet target;  Congress resists

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Minister of Finance, Fernando Haddad, is counting on an increase in revenue to reach zero deficit in 2024, but measures are likely to be resisted in Congress.| Photo: Rafa Neddermeyer/Agência Brasil

The government is counting on increases in revenue to reach zero public deficit by 2024, but resistance tends to be great in Congress, due to the weight of the tax burden.

“Increases in the tax burden were common practices in other PT governments, such as the two previous terms of Lula and Dilma Rousseff”, recalls the chief strategist at RB Investimentos, Gustavo Cruz.

According to Rafael Perez, economist at Suno Research, the government would need R$170 billion to close its accounts in 2024, while measures presented by the Treasury could guarantee much less than that – between R$80 billion and R$100 billion, he says the analyst.

The issue is that the Legislature is not excited about discussing increases in the tax burden. It reached 33.7% of GDP last year, according to the National Treasury, the highest rate in the historical series starting in 2010.

The political consultancy Eurasia points out that two additional revenue proposals are more likely to pass muster in the Legislature. These are those that deal with the taxation of offshore funds (PL 4173) and closed-end funds (MP 1184). Even so, the government will have to make some concessions.

Another government bet, the extinction of Income Tax deductions on Interest on Equity (JCP), runs the risk of being approved only next year, points out the consultancy. “An intermediate solution that restricts the scope of current deductions is the most likely”, highlight analysts Christopher Garman and Daniela Teles.

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