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Brazil's government considers taxing big techs if revenue falls short

Published 09/02/2024, 11:10 AM
Updated 09/02/2024, 01:35 PM
© Reuters. FILE PHOTO: The Paulista Avenue is seen in Sao Paulo, Brazil April 26, 2024. REUTERS/Amanda Perobelli/File Photo
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BRASILIA (Reuters) -Brazil's Finance Ministry will submit proposals to Congress this year to tax big tech companies and implement a global minimum tax of 15% on multinational corporations to secure the 2025 fiscal goal if there is a revenue shortfall.

Speaking at a press conference, the ministry's executive secretary, Dario Durigan, said the plan aligns with discussions on global tax cooperation that Brazil has been addressing as chair of the G20 forum of the world's largest economies.

"They take time to be implemented given the difficulties in obtaining approvals from various countries, but the idea is to bring the lessons learned," he said of the tax discussions.

In a presentation on the 2025 budget bill sent to Congress on Friday, which projects a primary surplus of 3.7 billion reais next year, the Finance Ministry estimated potential revenue of 17.9 billion reais from the increase in certain income taxes.

In a separate bill submitted on Friday to lawmakers, the government proposed changes to the social contribution tax on corporate income (CSLL) and interest on equity payments (JCP).

According to Durigan, the government is counting on these revenues for next year as part of a package worth 46.7 billion reais that also includes the end or the due compensation of tax waivers on payrolls for companies in some sectors and smaller municipalities - a controversial tax advantage that the government has already tried, but failed, to eliminate.

A bill passed by the Senate but that pends greenlight from the Lower House maintains the tax benefits but only brings due fiscal compensation to 2024, said During, highlighting that the Supreme Federal Court had already stated that, without this balance, these tax waivers could not be granted.

The ministry estimated raising 58.5 billion reais from tax negotiations next year, including 30 billion reais from a new dispute resolution program for large taxpayers to be launched in 2025 following an agreement made this year with state-owned oil giant Petrobras.

"Companies that approached us estimated paying 130 billion reais in settlements, but we included 30 billion reais in the 2025 budget bill," the ministry said.

The ministry also forecast an additional 28.5 billion reais through rulings by Brazil's Federal Administrative Council of Tax Appeals (CARF), which handles taxpayer administrative cases.

According to the ministry, correcting tax distortions will add another 20 billion reais in revenue next year.

Rafaela Vitoria, chief economist at Inter Bank, said the 2025 budget bill includes tax increase measures, the approval of which is unlikely, and others that may be frustrated.

© Reuters. FILE PHOTO: The Paulista Avenue is seen in Sao Paulo, Brazil April 26, 2024. REUTERS/Amanda Perobelli/File Photo

"Our estimate for 2025 is a deficit of 110 billion reais or 0.9% of GDP," she wrote in a note to clients.

Economists surveyed weekly by the central bank are also skeptical of the government's fiscal efforts, projecting a primary deficit equivalent to 0.76% of gross domestic product (GDP) in 2025, following a 0.6% shortfall this year, compared with a deficit target of zero in both years.

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