Tax Cuts, Cheap Loans for Brazilian Companies

April 4, 2012 Taxation in Brazil

Dilma Rousseff Announeces Tax CutsBRASILIA – The government of Brazil will soon implement several new economic stimulus measures, including tax cuts, with the aim of reigning in the negative effects of the continually rising value of the Brazilian real.

In a speech delivered on April 3rd in Brasilia, the President of Brazil Dilma Rousseff revealed that the government will soon implement several tax cuts in order to increase local production and fend off the “predatory competition” of other economies around the world.

According to the President, throughout 2013 the government will cut the rates of payroll taxes for employers in the industries most affected by the recent surge in the value of the Brazilian Real, such as automobile production, plastics production, and textile production and processing.

The measure is intended to lower the tax burdens on employers in the struggling industries, and to establish incentive for employers to create new working places. Currently the government estimates that the cuts will reduce the collection of payroll taxes by approximately BRL 12.1 billion. The government plans to compensate for the drop in revenues by hiking excise taxes on alcohol and tobacco products.

The government will also directly inject an additional BRL 45 billion into the Brazilian Development Bank, under the provision that the money is to be used to ease the credit and lending conditions for enterprises looking for long term loans to fund national development projects and infrastructure construction.

Soon after the President announced the tax changes, the Minister of Finance of Brazil Guido Mantega also added that in an effort to complement the tax cuts, the government will investigate even further economic measures to lower the value of the national currency.

Photo by Isaac Ribeiro