Tax reform needs to simplify, says André Esteves – 06/28/2023 – Market

The chairman of the board of directors of BTG Pactual, André Esteves, stated that the tax reform is an important step to be taken to improve the productivity of the economy and the business environment for Brazilian companies.

“Tax reform, even more so in a chaotic system like Brazil’s, can bring a lot of benefit,” said Esteves this Wednesday (28) during an event promoted by the bank.

Esteves’ statements come in the same direction as those expressed the day before by the presidents of Bradesco and Itaú, who also defended the approval of the tax reform.

The chairman of BTG’s board added that he hopes the reform will simplify the tax system in the country, without increasing taxes levied on people and companies.

In general terms, the tax reform indicates that it is heading in a good direction, but it remains to be seen how it will, in fact, be approved, said Esteves. It is necessary “to make sure that we are not going to leave the chaos we are in for another type of chaos. It has to leave for a simpler form, otherwise it is not worth changing”, said Esteves.

The executive also stated that the fiscal framework, if it does not guarantee an eternal stability of the debt, at least guarantees a reasonable trajectory of the federal debt.

The risk of Brazil going through some kind of greater economic stress, with the possibility of getting closer to the situation of neighbors like Argentina, “is dying with this new fiscal framework”, he said.

Esteves stated that, after the first months of the government, with some noise between ministers and President Lula (PT), the last few weeks began to indicate an “economic direction of responsibility”.

The banker also said that he expects the start of the interest rate cut cycle to begin at the BC’s Copom (Monetary Policy Committee) August meeting, in line with the signaling indicated by the monetary authority in the minutes released the day before.

Until the next Copom meeting, in about five weeks, Esteves assesses that inflation data should remain well-behaved, while economic activity numbers related to consumption, production and credit should show some slowdown.

In this macroeconomic context, and in view of the very high level of 13.75% per year of the Selic, the chairman of the board of BTG stated that cuts of 0.50 percentage points would be more adequate than reductions of 0.25 points.