Originally published in the October 16 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazil’s House of Representatives on October 10 concluded a second round of voting and approved the extension to December 31, 2011, of the 0.38 percent bank transactions tax (CPMF). With 333 votes in favor, 113 against, and 2 abstentions, the allied parties approved the CPMF extension without any change from the first round of votes, which took place September 20.
The extension now goes to the Senate, where the battle to approve the extension is expected to be fierce. The government needs 49 favorable votes in each of the two rounds to approve the extension. The most optimistic estimates count the government with only 41 votes. The government counts on dissident votes from opposition parties, although no further details have been disclosed.
At least one major obstacle has been removed. On October 11 Senate President Renan Calheiros started a 45-day absence leave, allegedly to take care of his four remaining accusations of violating the Senate’s code of ethics. Before Calheiros’s leave, opposition parties, in a demonstration of power of the opposition in the higher House, refused to debate CPMF extension in the Senate.
The government is now mobilizing all its ministries and members to push the Senate to approve the CPMF extension. Assuming that all voting deadlines are followed, the CPMF extension is expected to be approved by mid-December, a few days before the tax’s expiration.
Opposition parties are not completely in line with rejecting the CPMF extension: While some parties are completely against the extension, a few agree to debate the extension, but with CPMF at a lower rate of 20 percent. This is particularly true for the Party of the Brazilian Social Democracy, the party of former President Fernando Henrique Cardose, which believes that it has good chances in the 2010 presidential elections. Having at least some CPMF by 2010 would be an extra source of revenue for the new president, as President Luiz Inácio Lula da Silva cannot run for a third term.
David Roberto R. Soares da Silva