Government will have to block up to R$50 billion

The Minister of Finance, Fenando Haddad, will need to announce a reservoir of resources in the order of R$50 billion at the end of March 2024. The forecast is from Felipe Salto, chief economist at Warren Rena and former director of the Independent Fiscal Institution ( IFI).

This value is the maximum allowed within the tax rule. The new public accounts framework provides for a contingency of up to 25% of discretionary expenses, a non-mandatory part of expenses that includes funding and investments.

“Changing the fiscal target is an alternative, obviously, but it should be avoided at all costs”, says Salto.

The economist notes that the government needs to publish bimonthly revenue and expenditure bulletins and, if these indicate difficulties in meeting fiscal targets, the government needs to issue budget programming decrees, also called contingency decrees. For Salto, the first decree to block the 2024 Budget should come out in March.

The uncertainties surrounding how much Minister Haddad will raise from the projects being processed in the Legislature reinforce the possibility of contingency.

Salto notes that the “conditional revenues” in the 2024 Budget total R$168.5 billion, of which R$100 billion would come from the resumption of the quality vote in the judgments of the Tax Appeals Administration Council (Carf). Therefore, it remains to “find” R$68.5 billion, which the government hopes to obtain with measures awaiting a vote in the National Congress.

Projects such as the new taxation on closed-end and offshore funds are in the voting queue. The government also intends to change the rules for Interest on Own Capital (JCP), a type of remuneration distributed by companies to shareholders, as well as start taxing profits and dividends, among other initiatives.