Haddad: Exclusive funds are tax havens in Brazil – 03/08/2023 – Market

The Minister of Finance, Fernando Haddad (PT), confirmed this Thursday (3) that he will send to Congress this month, together with the 2024 Budget proposal, the projects for taxation of offshore and exclusive funds.

In an interview with GloboNews, Haddad classified the exclusive funds as “tax havens within Brazil”, and said that the lack of taxation of these shareholders represents an anomaly in Brazilian legislation.

Also known as super-rich funds, exclusive funds usually have a single shareholder, and are known for millionaire investments, because you need to have between R$ 20 million and R$ 30 million to structure this type of investment.

Differently from the other funds that exist in Brazil, the exclusive funds do not have the so-called “quota eaters”, which periodically advance the payment of Income Tax on earnings, even without redeeming the money.

Haddad stated that collecting taxes from shareholders of these funds is one of the economic team’s tools to seek tax neutrality, that is, to offset other measures implemented in the Tax Reform on consumption and income tax.

“Things are going to Congress. They need to be approved this year because, if not, the Budget rapporteur will have to cut expenses”, declared the Minister of Finance. “If you don’t put the rich in the Income Tax, you’ll have to take the poor out of the Budget.”

According to Haddad, the issue of taxation of exclusive funds is already pacified in society, being even defended by a large part of the super-rich in Brazil. “The whole world is making rules for these people.”

Asked about possible resistance in Congress to approve the issue, the minister said that the mayor, Arthur Lira (PP), with whom he met recently, expressed discomfort because he seemed to be against the measure.

According to Haddad, due to the way the matter is reported in the press, it gives the impression that Lira does not want to approve the matter. The question now, said the minister, is just to prevent the discussion from delaying the processing of other more urgent votes, such as the Tax Reform on consumption.

In addition to projects for taxing exclusive and offshore funds — those whose headquarters are abroad, although they may be managed in Brazil —, Haddad said that projects will also be sent to Congress this month to regulate the Union’s victories in the Superior Courts, as in the judgment on ICMS tax benefits (Tax on Circulation of Goods and Services).

“There are some measures [que serão enviadas ao Congresso] that are merely disciplining decisions of higher courts. So we are disciplining so that there is no doubt about the victory we have, “he said.

CUT IN THE SELIC

On the decision of the Copom (Monetary Policy Committee) to reduce the basic interest rate (Selic) by 0.5 percentage point, to 13.25%, Haddad said that the cut came with a correct calibration.

According to the minister, if the beginning of the cycle of interest rate cuts were in May, a cut of 0.25 points would even be more acceptable, but now, in the midst of concerns about economic activity and the job market, it made sense to greater reduction.

Haddad also stated that the Central Bank’s decision was a reaction to the recognition that the work of the government’s economic team has already received from risk rating agencies and international bodies.

“At the end of the first semester, we had a good result, international bodies and agencies recognized it, and it was up to the Central Bank to give a first signal”, he declared.

The minister also indicated that Brazil’s economic growth depends on the continued loosening of monetary policy. “I don’t see how to stimulate the economy from the fiscal side, but from the monetary policy side,” he said.

Questioned about the government’s relationship with the Central Bank, Haddad said that, despite more heated speeches by President Luiz Inácio Lula da Silva (PT), it was never his intention to review the BC’s autonomy.

“Lula never mentioned it to me, not even during the campaign.” According to the minister, “it never crossed the mind” of the president to backtrack on rules recently approved by Congress.

TAX REFORM

Questioned about what should be the base rate of the Tax Reform on consumption, Haddad said that something close to 25% is very feasible.

“It will be around 25% if the calibration of the exceptions is well done and if the expansion of the base [de contribuintes] work.”

According to the minister, today the real rate is around 34%, if all taxes embedded in goods and services are considered. “So, the rate [após a reforma] will necessarily be smaller,” he said.

This will happen, says Haddad, because the reform will inhibit litigation and tax evasion, increasing the taxpayer base, thanks to the digital implementations that will be made.

With regard to exceptions, which, according to studies, increase the main rate that will be charged from most sectors, the minister said that he expects the Senate to do an “editing job”, better selecting the segments of the economy that should be an exception or not. to the base tax.

Haddad said that, soon, the economic team will send senators a report with all the data on how much each of the exceptions provided for in the PEC (Proposed Amendment to the Constitution) of the Tax Reform costs the public coffers.