Government will need R$ 168 billion more in 2024 to close accounts; experts see ‘optimism’ and ‘distant goal’

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Budget proposal delivered last Thursday provides for ‘zero deficit’ – that is, that the government spends only what it collects. Balance depends on measures that Congress has not yet approved. The economic team of the Luiz Inácio Lula da Silva (PT) government expects a significant increase in tax collection in 2024 to reach the goal of “zero deficit” in government accounts, included in next year’s Budget proposal. Experts consulted by the g1, however, point out that the measures are “uncertain” and that there is an “optimism bias” in the Budget proposal. The bill with the forecast of expenses and revenues for the next year was sent by the federal government to the National Congress last Thursday (31). The text predicts a balance in public accounts in 2024 – that is, with no negative or positive result next year. To spend exactly what it intends to raise, however, the government will need to increase revenues by R$168 billion. Minimum wage, income tax table, Bolsa Família and tax collection measures: see highlights of the 2024 Budget proposal Government sends the 2024 budget to Congress ), but part still needs to be voted on by deputies and senators. This is the case, for example, of the taxation of “offshores” abroad and of exclusive funds, and the end of the deduction of interest on own capital. The three actions together could yield up to R$ 31 billion, according to estimates by the economic team. For the director of the Independent Fiscal Institution, Vilma Pinto, if on the one hand the goal of zeroing the deficit in 2024 signals the government’s commitment to fiscal discipline, on the other hand, there is uncertainty as to the viability of the goal itself. That’s because, according to the specialist, dependence on measures that are still being discussed in Congress could frustrate the expectation of revenue for 2024. “What worries me about this Budget project that was presented for next year is that a good part of the revenue are placed there in the budget item are revenues that are still uncertain”, said Vilma. The Minister of Finance, Fernando Haddad, has already acknowledged that it will be difficult to increase revenue by the amount necessary to zero out the deficit in government accounts next year. “We are not denying the challenge, we are not denying the difficulty. We are reaffirming the commitment of the economic area in obtaining the best possible result, taking into account the opinion of the National Congress”, said Haddad last Thursday. Expenses ‘underestimated’ In the evaluation of Marcos Mendes, research associate at Insper, there is an “optimism bias” in revenue estimates, but also in the expenditure projections that are in the 2024 Budget proposal. In other words: Mendes calculates that the amount reserved by the federal government for these payments next year will be insufficient. The Budget proposal foresees around BRL 914 billion for social security expenses. In the expert’s estimation, at least another BRL would be needed 16 billion for this category, considering the impact of the minimum wage adjustment on the value of benefits and the backlog of requests. As part of the social security benefits are equivalent to the minimum wage, any adjustments to the minimum wage have an impact on the value of the social security benefits. The bill sent to Congress predicts that the minimum wage will rise to R$1,421 in 2024, an increase of R$101 compared to the current level, which is R$1,320. Budget: Integration and Cities lose resources, Education and Transport are boosted Measures to increase revenue See measures proposed by the government in the Budget proposal to increase revenue by up to R$ 168 billion in 2024: ▶️ Return of the casting vote at Carf, body collegiate responsible for judging appeals from companies fined by the Federal Revenue Service. Expected collection: BRL 54.7 billion ▶️ Carrying out transactions by the Federal Revenue Service and the Attorney General’s Office of the National Treasury (PGFN) with taxpayers who have debts. Expected revenue: BRL 43.3 billion ▶️ ICMS tax incentives based on federal tax calculations (IRPJ and CSLL). Collection expectation: BRL 35.3 billion ▶️ End of the deductibility of interest on equity, which consists of a way of distributing the profits of a publicly traded company (which has shares on the stock exchange) to its shareholders. Expected collection: BRL 10.5 billion ▶️ Taxation of “offshores”, financial assets abroad. Expected fundraising: BRL 7 billion ▶️ Taxation of so-called exclusive funds, closed-end investment funds, usually composed of a single high-income shareholder. Expected collection: BRL 13.3 billion ▶️ Taxation of the electronic betting market on sports games. Expected revenue: BRL 700 million

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