Haddad denies creating taxes to comply with new tax rules

Fulfillment of the primary result targets foreseen in the new fiscal framework will not involve the creation of taxes or the increase of current rates, said this Thursday (30th), in Brasília, the Minister of Finance, Fernando Haddad. He, however, admitted that some exemptions for specific sectors could be reversed.

“If, by tax burden, one means the creation of taxes or the increase in the rate, it is not on our horizon. We are not thinking of creating a CPMF (former tax on financial transactions), nor of burdening the payroll”, declared the minister when presenting the complementary bill of the new fiscal framework.

Even without the creation of taxes, the minister said that some sectors that have benefited from exemptions for decades may have revised tax incentives. In some cases, new sectors not yet regulated may be taxed, such as online sports betting.

“We have many sectors that are overly favored with decades-old rules. We will, throughout the year, take measures to give consistency to this announcement. Yes, we have sectors that are benefiting and new sectors that are not regulated (such as electronic sports betting)”, said the minister. “We are going to close the drains of Brazilian patrimonialism and put an end to a series of abuses that were committed against the Brazilian State”, he stressed.

For the minister, a general review of tax incentives will benefit the entire population and allow the Central Bank to reduce interest rates in the future. Haddad asked the National Congress for sensitivity to review the tax benefits – currently around BRL 400 billion per year – and whose review was determined by a constitutional amendment of 2021.

“If those who do not pay taxes start to pay, we will all pay less interest. That’s what will happen. Now, for that to happen, the one outside the system has to come into the system. Congress has to be sensitive to realize how much its desire was degraded in practice by abuses and correct these distortions”, he stressed.

Credibility

In the assessment of the Minister of Finance, the flexibility brought by the new framework in unforeseen times in the economy will bring rules and more credibility. According to Haddad, the rules combined what he called “the best of both worlds”, by combining provisions of the Fiscal Responsibility Law and a more flexible spending limit than the old spending cap.

“We have traced a consistent trajectory of the primary result in which expenditure will necessarily follow revenue and, therefore, will expand the space to provide sustainability for public accounts”, he explained.

Next, he said the cap of 70% spending growth will be calculated on revenue growth in the 12 months ending in July, before the next year’s Budget is sent to Congress. According to the minister, this change is necessary to avoid a recurrent problem in the Brazilian Budget: the swelling of collection estimates by Congress.

He justified the band in the primary result target – tolerance margin of 0.25 percentage point (pp) of the Gross Domestic Product (GDP), up or down, based on the need to avoid instabilities in the execution of the Budget near the end of the year.

“The goal (of primary surplus) also has a small band to avoid the untied bloodletting of the end of the year or to spend more without planning, to spend more or else cutting expenses in a haphazard way”, he explained.

The minister did not inform a date for sending the complementary bill of the new framework to Congress. According to Haddad, the government will take advantage of the Holy Week recess to elaborate a careful text. Minister Tebet informed that she had placed two secretaries – of the Federal Budget and the executive secretary of the folder – at the disposal of the Ministry of Finance to help in the drafting of the project.

Quality

Also present at the announcement of the new fiscal framework, the Minister of Planning, Simone Tebet, reinforced the chorus in relation to the predictability and credibility of the new rules. She informed that the government intends to work to improve the quality of public spending.

“After the first numbers arrived, we saw that this fiscal rule is credible, it is possible and we have conditions to comply with it. Because it has flexibility and allows us to make adjustments to reach the goals. We are convinced that, if Congress approves this framework, we will be able to achieve our goal: to reduce expenses as much as possible with quality public spending. And we are going to try to eliminate this deficit and have the possibility of a surplus in 2025”, he promised.