Brazil’s lower house of congress on Wednesday approved legislation creating new taxes on the country’s wealthiest residents, a boost for President Luiz Inacio Lula da Silva’s plans to increase government revenue and balance the nation’s budget.
Lawmakers voted 323-119 to approve a bill to tax offshore and exclusive funds, a priority for Finance Minister Fernando Haddad as he seeks to deliver on his pledge to eliminate Brazil’s primary deficit in next year’s budget.
The proposal still needs Senate approval to become law.
The new levies are key to Haddad’s effort to shore up Brazil’s public accounts, but a vote on the measure was repeatedly delayed amid disputes over the rates of taxation and other elements of the legislation.
The office of congressman Pedro Paulo, the proposal’s rapporteur in the lower house, estimates that the levies will raise 20 billion reais ($4 billion). Aside from increased revenue, it aims to make Brazil’s complicated tax system less regressive.
Haddad will still need to raise additional funds to generate the 168 billion reais necessary to hit his zero-deficit target but has said he can do so if congress approves the measures he has proposed.
The legislation proposes that offshore funds be taxed annually at 15%. Taxpayers who update the value of their assets abroad to market value on Dec. 31 will pay 8%. That payment must be made by May 31, 2024.
Exclusive funds will be subject to periodic taxation of 15% on long-term investments and 20% for those on a shorter term. The updating of the stock value of exclusive funds made in 2023 will be subject to a tax rate of 8%.
One of most contentious issues involved a proposal to raise the threshold, measured by number of shareholders, required to allow investment funds in agro-industrial chains, known as Fiagro, to claim tax-exempt status.
Currently, 50 shareholders are needed. The rapporteur had proposed increasing this number to 300, but, facing pressure from the agribusiness caucus, he reduced it to 100.