Originally published in the August 21 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Tax revenue figures released by Brazil’s Federal Revenue Department disprove an argument by the executive branch that reducing or eliminating the bank transactions tax (CPMF) would harm the country’s economic stability.
Brazil’s federal tax revenues in the first half of 2007 — even without computing the tax revenues generated by the 0.38 percent CPMF — are higher than those generated in the same period of 2006 after computing CPMF. Tax revenues were higher by BRL 2.8 billion (approximately $1.4 billion) than in the first half of 2006.
That finding most likely will be used by opposition parties in Congress during debates over the approval of a CPMF extension until 2011. The executive branch opposes any change to the existing CPMF rules or rate, while opposition parties want either the elimination or a gradual reduction of the tax.
The information, from the Federal Tax Revenue Review (Análise da Arrecadação de Receitas Federais), has been published on the Federal Revenue Department (FRD) Web site, at www.receita.fazenda.gov.br. The review shows that Brazil’s overall tax burden has increased significantly in the past few years.
While the government says a reduction of CPMF revenues could harm the country’s economic stability, the figures from the FRD show that even without CPMF, the government would be able to increase tax revenues.
The FRD’s figures show that federal tax revenues in the first half of 2007 totaled BRL 205.95 billion, of which BRL 17.46 billion came from CPMF. Excluding CPMF from the 2007 figures, federal tax revenues total BRL 188.49 billion.
Considering that federal tax revenues for the first half of 2006 totaled BRL 185.68 billion (with CPMF), it can be concluded that even if CPMF had been revoked by December 31, 2006, the federal government would still have received BRL 2.81 billion (or 1.5 percent) more tax revenues than in 2006. Therefore, it will be hard for the executive branch to argue in Congress that CPMF’s revocation or gradual reduction would be harmful to the economy.
David Roberto R. Soares da Silva