Despite the weak economy in Brazil, the team behind the re-election of President Dilma Rousseff are reversing the temporary tax breaks created by former Minister Guido Mantega. However, investors should not be surprised by these changes as although government intend to replace some tax revenue, they were always intended to be temporary.
Joaquim Levy, Brazil’s latest finance Minister, announced four tax increases that he said would bring in an extra R$20.6 billion ($7.9 billion) in revenues this year despite a current account deficit of R$8 billion in November due to government spending on infrastructure and development to cope with the influx of tourists predicted for the World Cup (which was held in June last year) and the upcoming 2016 Olympic Games.
The four new hikes will erase tax breaks passed by Mantega in an effort to stimulate the economy and control inflation; an example of which will see gas prices rise by R$0.22 a litre (roughly $0.07). Levy said that should bring in R$14.07 billion to the federal government’s coffers.