Author: Juliana Rocha

Source: Gazeta Mercantil, 13/07/2007

Brasília, 13 July 2007 – Exemption measures did not prevent the increase in 2006 compared to 33,7% in 2005. Despite the tax exemptions granted last year and the promise not to raise taxes any more, Brazil's tax burden has returned rising and reached 34,5% of the Gross Domestic Product (GDP) in 2006. In 2005, taxes weighed 33,7% of GDP on economic activity. The news was advanced yesterday by the Minister of Finance, Guido Mantega, in a public hearing at the Finance and Taxation Commission of the Chamber of Deputies. The two numbers already consider the new methodology for calculating the GDP of the Brazilian Institute of Geography and Statistics (IBGE).

In 2006, the government gave up collecting R$ 42 billion to grant tax incentives. Even so, it achieved a record collection of R$ 392,542 billion. But the Federal Revenue has not yet officially released the figures for last year and, although the IBGE has already rebuilt the accounts of the economy's result retroactive to 1999, based on the new way of calculating GDP, the Treasury has not yet rebuilt the calculations of the tax burden before 2005.

Prior to the revision, the 2005 tax burden had been measured at 37,3% of GDP, the highest on record. Mantega demanded approval of the Tax Reform project in the second half. He reminded the committee's deputies that the current tax payment structure is the main obstacle to investment. 'The government is discussing this tax structure which is unfair, inefficient and irrational', criticized the minister. The problem is that one of society's greatest fears regarding tax reform is the possibility that it will increase the burden even further.

After the hearing, however, the minister showed confidence in approving the reform. 'We have a mature reform project that will benefit production and the country. We are in a position to approve it in the second half of this year.' The government's biggest concern now is to guarantee the extension of the CPMF (Provisional Contribution on Financial Transactions) and the DRU (Unlinking of Union Revenues), which guarantees freedom in the application of 20% of revenues.

The renewal of these two sources of revenue still needs to be approved by Congress, but the government already has the revenue, which is provided for in the Budgetary Guidelines Law (LDO). With the parliamentary recess in July, the vote will be postponed to August. 'If we delay in approving this law, with each passing day we lose R$ 152 million. We would have to review investments, review expenses, this is very serious. The CPMF is a necessary tax for fiscal balance and for the PAC', he said.

According to Mantega, with the CPMF alone, the government should collect R$ 38 billion this year. DRU guarantees over R$ 20 billion in cash. 'The government does not take the approval of these items for granted, but it would be a catastrophe for Brazil not to extend the CPMF and DRU.' The minister defends the extension of the check tax, but says that the government is concerned with reducing the tax burden. According to Mantega, since President Luiz Inácio Lula da Silva took office, there has already been a reduction of R$ 30 billion in taxes.

The comparison of the tax burden in relation to the previous years of his own government generates unfavorable statistics for Lula. In the first year of the PT government, in 2003, the load was 34,88%. Before the 2005 GDP revision, the load reached a record 37,3%.