Government to increase taxes for an extra $7.85 bn

Finance Minister Joaquim Levy announced Tuesday (Jan. 20) the government is going to raise taxes to increase federal revenue. An extra $7.85 billion is expected to boost this year's tax revenue.

The largest contribution will come from three fuel duties. Considering all three, the increase will total $0.08 per liter of gasoline and $0.06 per liter of diesel as of February 1st, for a revenue target of $4.65 billion.

Disclaiming responsibility for fuel prices, the minister was vague about whether the higher taxes will translate into higher prices. “This will depend on market developments and on the pricing policy pursued by Petrobras. It's not a decision for the Ministry of Finance, it's up to Petrobras,” he said. In theory, the state-owned oil company could actually reduce prices at refineries to meet the cost of the tax increase. This is possible because gasoline and diesel prices in Brazil are currently above international oil prices.

The proposals go on to include taxing cosmetics wholesalers. This is because the government is planning to distribute the levies more evenly across the supply chain, with an eye to boosting tax revenues by $145.18 million in 2015.

Furthermore, a 11.75% tax rate will be levied on imported goods instead of the current 9.25%. The Finance Minister argues that the increase is needed to fix a distortion allegedly caused by the Supreme Court (STF) when it removed a tax from the calculation of duties on imported goods. “As a result of the STF decision, one particular tax began to be levied at lower rates on imports than on domestic goods,” the minister explained. The increase is hoped to yield $266.74 million this year.

Finally, loans will also become more expensive with a higher tax on financial transactions. In the case of credit for individuals, the rate will be doubled from 1.5% to 3% per annum, which means borrowers who currently pay 1.88% per year will now pay 3.38%. According to the Federal Revenue Service, the increase will mean a $2.82 billion boost to the government coffers this year.

Translated by Mayra Borges