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By Marcela Ayres and Jamie McGeever
BRASILIA, July 29 (Reuters) – Brazil’s Economy Minister Paulo Guedes said on Wednesday he is very optimistic on pushing through wide-ranging tax reform, with the next stage centering on income and payroll taxes following the proposals on value-added tax earlier this month.
Speaking to reporters in Brasilia, Guedes stressed there will be no tax rises and that the country’s overall tax burden will not increase, adding that widening the tax base can help reduce income tax and eliminate some others entirely.
“We are very confident on this wide-ranging reform. The first stage was VAT, and selective taxes, income tax and payroll tax will follow. We are very pleased with the first steps we are taking,” he told reporters in Brasilia.
Simplifying Brazil’s complex tax system and ultimately lowering taxes is one of the main planks of Guedes’s economic agenda. This will help boost investment, spending, employment and economic growth, he said.
Brazil’s overall tax burden is around 33% of gross domestic product, one of the highest among developing nations, and is skewed towards indirect and regressive taxes. Guedes has previously said he would like to reduce that to 20% of GDP over the next 15 years.
The government is under increasing pressure to raise revenue to help plug the budget deficit, which has exploded to record levels due to the COVID-19 crisis. But Guedes insisted there will be no tax increases.
“We will not raise taxes. If you create a wider base, and tax a little here, you can reduce income tax, reduce seven, eight, nine, ten taxes, eliminate some (others),” Guedes said.
Officials have indicated they are considering implementing some form of transactions tax, along the lines of the scrapped and unpopular ‘CPMF’ tax, to fund payroll tax cuts or exemptions.
Earlier this month, Guedes delivered the first part of the government’s tax reform proposals to congressional leaders, combining two federal consumption taxes into a single value added tax set at 12%. (Reporting by Marcela Ayres Writing by Jamie McGeever Editing by Chris Reese and Aurora Ellis)
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