BRASILIA (Reuters) -Brazil’s Senate approved on Wednesday a bill to increase tax revenue by preventing companies from using corporate tax breaks granted by states to reduce taxable income for federal government coffers.
The measure is key to efforts to rework government revenue and spending plans, which includes the goal of eliminating the primary budget deficit next year.
President Luiz Inacio Lula da Silva must now sign the bill for it to become law as it was also approved last week by the lower house of Congress.
The text of the approved proposal also includes changes to so-called interest on equity (JCP) payments that currently enable companies to deduct shareholder remuneration from their corporate taxes.
Initially, the federal government aimed to raise an additional 45.8 billion reais ($9.32 billion) in 2024 through the measure. However, lawmakers amended the text reducing the amount of extra revenue by an undetermined amount.
The first version had pledged to eliminate JCP, an initiative that alone could have raised government revenues by 10.5 billion reais in 2024.
Finance Minister Fernando Haddad reiterated on Wednesday the government is still counting on 35.3 billion reais in revenue in 2024 from the corporate tax discount changes, despite the modifications made by Congress.
He also had said last week that the government was planning to take administrative measures to offset revenues lost by not eliminating JCP.
Lula’s economic team aims to eliminate the primary deficit in 2024, a goal the market has met with skepticism due to the plan’s heavy reliance on uncertain revenues, some of which are still subject to final legislative approval.
($1 = 4.9163 reais)
(Reporting by Maria Carolina Marcello in Brasilia; Writing by Andre Romani in Sao Paulo; Editing by Kylie Madry, David Alire Garcia and Sonali Paul)
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