Originally published in the January 23 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazil’s executive branch is reportedly considering creating a new bank transactions tax (CPMF), similar to the 0.38 percent CPMF rejected by the Senate in late 2007. The new tax is under preliminary discussion among members of the executive branch and allied parties in Congress.
The new tax would have a lower, 0.2 percent rate and would be used entirely to fund public health. The government and allied lawmakers must now try to find supporters for the new tax, particularly among state secretaries of health and public health entities.
Another difference between the old and the new CPMF is that the latter would be permanent, as opposed to the former CPMF, which required extension every four years. Based on the latest projections of CPMF in 2007, the new CPMF could generate approximately BRL 20 billion (approximately $11.42 billion). By making cuts in public expenditures of another BRL 20 billion, the government would be able to avoid fiscal harm resulting from the end of CPMF.
Critics say that the creation of a new CPMF earmarked exclusively for public health is an excuse to override the public’s unwillingness to have this type of tax. Many argue that Brazil’s public health crisis has nothing to do with lack of funds, but rather with lack of management of public funds. The federal budget destined for public health is indexed to the country’s economic growth and has soared from BRL 20 billion in 2000 to BRL 47.8 billion in 2008.
The 0.38 percent CPMF was originally created in 1996 to be effective in 1997 at a rate of 0.2 percent, and its revenues were supposed to be earmarked solely for public health. The rate was eventually increased to 0.3 percent and then 0.38 percent.
David Roberto R. Soares da Silva