Brazil’s economy minister confident about approval of tax overhaul

Political disagreement has halted deliberations on the tax reform in the National Congress, Brazil’s Economy Minister Paulo Guedes said Thursday (Dec. 3). However, at an event promoted by the Brazilian Construction Industry Chamber (CBIC), he said he is confident about striking a deal to approve the proposal.

“I think we’ll make a deal quickly. It can be resumed now or later, but the truth is that we’re doing this reform,” the minister declared during an online conference with construction entrepreneurs.

Regarding the impact of the tax reform on the revenues of states and municipalities, Guedes said he does not believe the approval will bring losses to local governments. The recovery of the Brazilian economy from the most severe stage of the COVID-19 pandemic will raise revenues locally, he argued.

Imports

Guedes said the government has kept a watchful eye on the provision of supplies for industry, adding he may temporarily reduce import tariffs in order to prevent shortages in some sectors, should raw materials prove scarce. The measure would be given the same tax reduction model as imports of up to 400 thousand tons of rice, which is to stand until the end of this year.

“We have our eyes open to this possibility. We’re giving it time. Industry is not being brought to a standstill because of a shortage in supplies. We’re waiting for the blast furnace, the steel, the packaging to arrive,” he added.

In the minister’s view, supply issues are temporary. He noted that occasional difficulties facing the industry in its attempt at obtaining materials have a positive side, and could be viewed as a sign of economy recovery.

“It’s better to have a problem of strong demand to have to look for supplies, than the contrary, which is a surplus in stocks over the course of the whole production chain, instead of having orders you want to deliver,” he declared.

Reopening

The government is willing to speed up the country’s commercial opening, Guedes pointed out, slashing tariffs on imports. The independence of the Central Bank, he went on to declare, would help curb inflation in the case of a flood of imported goods. In this scenario, the monetary authority would increase interests in the case of an excess in the consumption of foreign products.

Early in his term of office, Guedes had declared he would promote commercial opening piecemeal, after the approval of overhauls to cut taxation on the payroll. In exchange, the economic staff plans to devise a contribution on digital transactions, but the bill, unveiled in public hearings, is yet to be submitted to Congress.