Author: Luciana Xavier

Source: Agência Estado, 13/07/2009

Raul Velloso - Public Account Specialist

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The drop in tax revenues in recent months reflects the global crisis, the government's countercyclical policy and the poor management of the IRS, said economist Raul Velloso, a specialist in public accounts and former assistant secretary of Planning.

Because of the drop in tax revenue, the Minister of Finance, Guido Mantega, decided last week to dismiss the secretary of Revenue, Lina Vieira. "The expectation is that the replacement (of Lina) may bring new light to the results", said the economist, in an interview with AE Broadcast Ao Vivo.

According to an article published today in the newspaper “O Globo”, the collection should fall for the eighth consecutive month in June, with a decrease of around 5,5% to 6% compared to June 2008, and this would have contributed to Lina lose his job. In May, the collection was R $ 49,835 billion. The result of the June collection will be released on Thursday, the 16th.

Velloso said that with the end of the reduction or exemption of IPI for some sectors, such as the white line, the collection should improve. “The collection should grow and the economy itself should start showing better results. I would say that 2010 will certainly be a better year, because the basis for comparison will be a bad year ”.

The economist recalled that the primary surplus is being "strongly affected" by the crisis and it is still difficult to predict when the "turnaround" will occur and therefore, it is likely that the government will not be able to meet the primary surplus target of 2,5% for this year. “There is a strong drop in revenue and expenses are rising above expectations. But it is possible that in 2010 the surplus will rise again ”, he observed.

Velloso said that the government has acted "on the basis of reacting to pressure" from various sectors of the economy and that this may not be so good for the economy in the medium and long term. “I would prefer that the government have a better elaborated plan for countercyclical policy, such as an investment program to leverage the private sector. A plan that would allow a more solid resumption of the economy, based on investments. And as for public investments, they should have been looking at this more carefully for a long time, ”he said.

The economist, however, warned that many expenditures that are being made now, such as raising the minimum wage, will eventually be inherited by the next government and may hinder the country's sustained growth in the coming years. "The next government, whatever it may be, is going to inherit a delayed-effect bomb, we will have new spending congestion, and the dramatic result of that may be having to raise interest rates."

According to him, the country has become accustomed to having lower interest rates, but “the BC may have to give up the 1-digit interest later and return to the executioner position. It may be up to 2010, but it is more likely to be in 2011 ”, he warned.

Raul Velloso said he still does not believe in tax reform in this government or in the near future. “We will have to wait for a new boom period. We had that opportunity between 2002 and 2008 and we didn't. If the reform was already something distant, now it is even more distant from the real world ”.