Brazil announces tax hikes, spending cuts to end deficit
September 15, 2015, 5:03 am

People walk by a store, in downtown Sao Paulo, Brazil, on Sept. 14, 2015 [Xinhua]

Planning Minister Nelson Barbosa told a news conference on Monday that the austerity package would total 65 billion reais ($16.9 billion).

The CPMF tax on financial transactions was brought back from cold storage. It is expected to raise 32 billion reais next year if it passes muster in the Brazilian Congress.

The CPMF tax expired in 2007, and has been brought back at a lower rate of 0.2 percent this time, Finance Minister Joaquim Levy said.

“We know this effort to cut spending will only take us so far, so as would happen in any country in the world in a moment of reduced economic activity and tax income, you have to seek out other resources. We’re trying to find that balance,” Levy told reporters.

Major items in the package unveiled on Monday include freezing public sector salary raises and hiring; entirely eliminating 10 of 39 ministries; cutting 1,000 jobs and reducing housing and health-related social spending.

After a weekend huddled with ministers, pressure piled on President Dilma Rousseff to make major cuts in welfare spending, a distinguishing trait of the Workers Party government. Rousseff’s landmark Bolsa Familia poverty relief programme was not affected by the cuts.

The government plans to save 20.6 billion reais in spending by cutting back on programs that provide sanitation, housing, technical training and broadband. The government will save 7 billion reais by delaying wage increases for some civil servants.

“These are major corrections, which involve government employees in a meaningful way and how the machinery of state works,” Levy said on Monday.

The government will target a budget surplus that excludes interest payments of 34.4 billion reais in 2016, which is equal to 0.7 percent of gross domestic product, Levy said. That would entail combined savings and extra revenue of about 65 billion reais.

TBP and Agencies