Originally published in the July 23 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazil’s financial transactions tax (IOF) generated BRL 8.4 billion in tax revenue in the first half of 2008, a 198 percent increase over the BRL 2.82 billion collected in the same period of 2007.
The revenue surge is the result of the IOF rate increases applicable to credit and currency transactions in early 2008 as a consequence of the expiration of the 0.38 percent bank transactions tax (CPMF) in December 31, 2007.
Federal Revenue Department Chief Commissioner Jorge Rachid says IOF revenues have been sustained by the demand for credit by both individuals and companies in the first half of the year.
The government had also increased from 9 percent to 15 percent the rate of social contribution on net income (CSL) applicable to financial institutions. CSL revenue from financial institutions increased by 29.55 percent in the first half of 2008 compared with the same period of 2008.
In addition to rate increases, Rachid attributed the excellent CSL and IOF revenues to the growth of the Brazilian economy and the efficiency of administrative measures adopted by the Federal Revenue Department and the Federal Revenue Attorney General’s Office.
Tax revenues in general increased compared with the same period of 2007, according to Rachid. In June they reached a monthly record of BRL 55.74 billion. In 2008 the federal government has collected BRL 327.67 billion, 10.4 percent more than in the first half of 2007.
Rachid attributes the record tax revenues to average increases of:
• 14.2 percent in corporate sales;
• 14.45 percent in salaries and wages;
• 46.8 percent in imports; and
• 6.7 percent in industrial production.
Although inflation and higher interest rates in both domestic and international scenarios may slow the growth of the Brazilian economy, no one believes tax revenues will be significantly affected.
David Roberto R. Soares da Silva