Transactions tax will be neutral
With the assumption that there will be no hike of the tax burden, President Jair Bolsonaro will support Economy Minister Paulo Guedes's proposal of creating a Contribution on Transactions with a 0.2% rate. A close relative of the late Provisional Contribution over Financial Transactions (CPMF), the tax on transactions intends to have a wider base by including all digital transactions in its scope.
The tax is expected to collect about R$120 billion a year. With this money, the government intends to lower social-security taxes charged over payrolls within a certain income bracket, which may be something between two and three minimum wages.
The Economy Ministry also plans to adjust the income tax brackets to inflation and use the contribution to help fund new social programs, such as one for minimum income and the new green-yellow job contract, freed from several taxes. Another intention is to reduce the corporate income tax to around 20% from the current average of 34%. But in this case the compensation would be with the taxation of dividends.
The minimum income program, so far called Renda Brasil, is expected to be created in time to replace the emergency aid, a R$600 cash transfer to informal workers during the pandemic, which ends in September. The permanent cash transfer will be smaller than the aid.
One study conducted by economic officials shows that with the budgets of Bolsa Família (the current cash-transfer program to low-income people, which has R$30 billion), salary allowance (R$18 billion) and insurance for fishermen during off-season (R$3 billion) add up to R$51 billion, enough to serve 57.3 million beneficiaries with an average monthly amount of R$232. The government would like to propose something closer to R$300.
While drafting the budget for 2021, whose bill will be submitted to Congress by August 31, officials are poring over the expenditures in search of where to cut between R$10 billion and R$20 billion to ensure compliance with the spending-cap law (which allows government spending to grow only as much as inflation).
There is plenty to cut, they conclude. The problem is the willingness to fight the lobbies whose power has been immense. It is more than known that public universities benefit richer students, but who will dare advocating charging from those who can pay? Or what is the reason for employees of courts and of the Prosecution Service, who earn monthly salaries of R$30,000, also have more than R$1,000 per month in...
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