Tax rule: Haddad says technicians closed drawing – 03/24/2023 – Market

The Minister of Finance, Fernando Haddad, said this Friday (24) that the government’s technical area has already concluded the design of the proposal for a new fiscal rule to be presented to the National Congress.

According to him, it is possible that President Luiz Inácio Lula da Silva (PT) will present new questions until he gives the final word, but, in the scope of the technical discussion, the terms of the project are already closed.

“The technical area has closed. Everything is in order,” Haddad told journalists, after participating in a meeting with Lula, ministers and government leaders at the Alvorada Palace.

“Now let’s go back to the president with the answers to the questions he asked, and just set the date [do anúncio]”, he stated.

There is an expectation that the new rule will be announced after the trip of the president and ministers to China. Lula was supposed to leave this Saturday (25), but postponed his departure to Sunday (26) after being diagnosed with mild pneumonia. The entourage should return to Brazil on April 1st.

The finance minister, however, did not rule out the possibility of the president raising new points to be dealt with by the technical area.

“The final word is always the president’s. Until it is announced, the final word is always his. He can ask new questions. But those that were asked at last Friday’s meeting (17) have already been clarified,” he said.

“The technical meeting was very smooth. We will give feedback to him [Lula], and we hope to get back to him in the next few days to find out if there are any other questions he might consider. But so far so good,” he said.

Last week, both Haddad and Lula stated that the intention was to announce the proposal before the trip to China. However, the disclosure had to be postponed due to the lack of definition surrounding the parameters of the new fiscal rule, as shown by Sheet.

At the beginning of the week, a series of strategic decisions were still pending, determining what space the government will have to spend in the future. One of them was the need to accommodate the resumption of constitutional links to health and education, which ensure a higher spending floor for both areas.

Another was which indicator to use as a reference for the speed of growth of the public expenditure cap.

Discussions take place under pressure from PT members so that the pace of adjustment in public accounts is more gradual than intended by Haddad, who aims at a more ambitious goal of zeroing the deficit as early as 2024.

The assessment among PT members, however, is that a fiscal tightening at this time could throw the country into a violent political crisis, compromising the government’s popularity and opening space for the rise of former president Jair Bolsonaro’s (PL) political group.

The pace of adjustment depends precisely on the rule parameters. The variables must reflect projections for certain economic indicators, such as GDP (Gross Domestic Product) or GDP per capita. The government considered several options, which allowed more or less space for expenditures.

The proposal for a new fiscal rule may still have adjustment triggers linked to the primary result, according to interlocutors interviewed by the Sheet.

In this model, the spending target is associated with the expected income and expenses for a period. If the primary result is considered poor in relation to a certain level, still under study, restrictions are put in place to increase spending in the following period.

The adjustment instruments are an important signal within a fiscal framework that targets the medium term and will have in the projections for this horizon a foundation to try to convince investors that the accounts are sustainable.