Brazil Moves to Slash Tax Breaks, Averting IOF Hike

Brazil's government supports a bill to cut federal tax breaks by 10%, potentially nullifying a proposed increase in the financial transactions tax. This move could boost government revenue by 40 billion reais annually, though it exempts certain areas like the Manaus free trade zone.

In a pivotal policy shift, Brazil's government is anticipated to endorse a bill that proposes a 10% reduction in federal tax breaks. This strategic move could prevent the enactment of a debated tax increase on financial transactions, according to sources speaking with Reuters on Thursday.

The bill, introduced by lower house lawmaker Mauro Benevides, outlines a phased reduction in tax benefits by 5% in 2025 and another 5% in 2026. This legislation targets fiscal and credit benefits, excluding the Manaus free trade zone and non-profit entities.

This tax reform is expected to generate 40 billion reais ($7.16 billion) in additional revenue yearly, averting backlash from a prior decree that heightened transaction taxes. Brazil's Finance Minister Fernando Haddad promises new fiscal measures next week to balance public accounts.