Guedes seeks ways of freeing revenue in the budget
As soon as President Jair Bolsonaro ruled out his suggestion to fund cash-transfer program Renda Brasil, Economy Minister Paulo Guedes returned to his aides and requested alternatives. Already on that Monday, officials under the coordination of Finance Secretary Waldery Rodrigues started to detail the so-called 3-D strategy, which stands for "desobrigação, desvinculação and desindexação," or the removal of earmarks, indexation and obligations from the budget.
At the meeting in which he presented his plan for the post-pandemic, which included the replacement of current cash-transfer program Bolsa Família with Renda Brasil as part of a package called Pró-Brasil, to be announced on the following day, Mr. Guedes proposed the minimum income to be funded by rearranging existing social programs such as salary allowance, continuous cash benefits and other items of the federal budget. This way, cash-transfer programs would be better focused.
Mr. Bolsonaro said on Wednesday, during a trip to Minas Gerais, that he had suspended the announcement of Pró-Brasil scheduled for Tuesday because he didn't intend to take money away "from the poor to give to the very poor." With that hypothesis ruled out, what is left is the 3-D included in the constitutional amendment proposal (PEC) of the so-called federative pact, or the distribution of revenues and obligations among the three levels of government. Mr. Bolsonaro also said he expected new solutions for this Friday.
Mandatory expenditures include, by order of size, social security, personnel and a group of programs whose expenditures are under the control of flows. They are subsidies and other tax benefits (known as tax expenditures), continuous cash benefit and others.
Measures to cut tax expenditures, which totaled R$307 billion last year, would include since the reduction of benefits of presumed credit of PIS and Cofins to agriculture to the limitation for deduction of medical expenses in individuals' income tax returns.
According to document sent to Congress late last year, therefore prior to the pandemic, cuts of such expenditures could generate about R$56 billion in the budget for 2021. The goal would be to reduce the tax expenditures from the current 4.2% to 2% of GDP in ten years.
About 70% of the budget is indexed to the variation of the minimum wage or to price indices. This would amount to some R$75 billion when the inflation considered converged to the target of 4.25% last year. But now, with...
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