Tax rule has a floor for investment, which may be higher if there is an improvement in the accounts

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Proposal for a new fiscal framework was released by the economic team. The aim is to allow for ‘priority’ spending, such as health and education, and increased investment, but without losing control. Minister Fernando Haddad, during the presentation of the new fiscal framework Reproduction The proposal for a new fiscal framework, that is, a new rule for public accounts to replace the spending ceiling, brings a floor to public investments. Investments, according to the proposal, may be greater than forecast in the floor if there is an improvement in the performance of public accounts. The increase in investments is one of the priorities of the government of President Luiz Inácio Lula da Silva (PT). The proposed rule limits spending growth to up to 70% of the change in primary revenue over the last 12 months, ending in July. It also establishes a kind of interval for the target of the primary result of the public accounts (balance between what is collected and what is spent, not counting the payment of interest on the debt). The plan for the economic area provides for a target center for the result of public accounts and tolerance ranges for more and less. According to the government, the “band” will be with real growth in primary expenditure between 0.6% and 2.5% per year. Use of surpluses in investments If the government’s primary result is above the ceiling of the band, the surplus can be used for investments. The proposed rule also predicts that if the primary result falls below the band, revenues can only grow by 50% of revenue growth in the following year. Last year, the budget coordinator in the transition team, senator-elect Wellington Dias (PT-PI), stated that the PT government would seek to make around R$ 100 billion in investments feasible, equivalent to 1% of the Gross Domestic Product (GDP) , in 2023. The 2023 budget proposal, sent in August by President Jair Bolsonaro’s government, provided for only R$ 22.4 billion for investments, down 50.4% compared to this year’s level. It was the lowest level in 14 years. After the approval of the transition PEC at the end of 2023, with authorization to increase spending by more than R$ 160 billion this year, the government adjusted the budget and raised the estimated value for investments to R$ 70.4 billion this year . According to the Minister of the Civil House, Rui Costa, the Lula government also wants to boost investments in the country through concessions and public-private partnerships (PPPs). The name of the new program has not yet been defined, but it has been dubbed the “new PAC”. Minister Alexandre Padilha says that the text of the new fiscal rule was well received by the opposition New fiscal rule The proposal for the so-called “fiscal framework”, the new rule for public accounts, seeks to replace the spending ceiling. The spending ceiling, which has been in force since 2017, limited most expenses to the previous year’s inflation and, according to official data, reduced resources in areas such as health and education. To be valid, the text, which will be forwarded through a bill, will still have to go through analysis by the National Congress. The purpose of the new fiscal rules is to allow the government to make spending that is considered a priority, such as health, education and public safety. And make it possible – without creating a lack of control over public finances – to increase public investment, raising the economy’s productive capacity.

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