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Economy will start year with discussion on taxes and new fiscal framework

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Even with the possibility of spending up to R$ 168 billion outside the federal spending ceiling this year, the economic team will start the new government with two urgent priorities. The future Minister of Finance, Fernando Haddad, will start the year by analyzing the public accounts and preparing a new fiscal framework that will replace the current rules.

Shortly after the approval, by the Chamber of Deputies, of the Constitutional Amendment of the Transition, ten days ago, the minister explained that the new economic team will re-estimate revenues in the first weeks of January and that the deficit projections in the public accounts that have been presented “will not prevail”.

The question will be to know if the reassessment will result in the need to increase taxes to close the accounts, but that will depend on what the fine-tooth comb in the public accounts will point out. On the last 22nd, the former Federal Budget Secretary, Ariosto Culau, stated that the 2023 Budget project, sent to the National Congress in August last year, had underestimated revenues of around R$ 23 billion. One option for the new government will be the revision of exemptions and tax benefits to sectors of the economy, determined by a constitutional amendment of 2021, but never performed??

Another factor that may reduce the chances of raising taxes would be the review of the registration of the former Auxílio Brasil, which is now renamed Bolsa Família, to eliminate irregularities. On December 16, a report by the National Treasury pointed out that there is a potential to save up to R$ 26 billion with a reformulation of the social program to return to paying benefits according to a minimum per capita amount (to each family member), instead of paying R$ 600 per family without considering the number of members.

new anchor

In addition to sweeping public accounts, the new economic team will spend the first six months of the government poring over the preparation of the new fiscal framework that will replace the spending ceiling. Enacted by Congress on the 21st, the Constitutional Transition Amendment requires the government to submit a supplementary bill by August. However, Haddad has already stated that he intends to send the proposal in the first semester.

In recent interviews, the new minister stated that he will still talk to economists to define what the new fiscal anchor will be. Haddad did not enter Detailssaid only the new rules need to guarantee the balance of public accounts, be sustainable in the medium and long term and have credibility similar to that of the Fiscal Responsibility Law.

Budget

By withdrawing BRL 145 billion from the Bolsa Família spending ceiling and an additional BRL 23 billion in investments if there is excess revenue, the Constitutional Amendment of the Transition reduced the restrictions that the new government would have when recomposing the 2023 Budget. were approved on the last 22nd, the end of the legislative year of Congress, with the restoration of funds for social, health and investment programs that had suffered major reductions in the original proposal.

Among other points, the text guarantees the viability of promises made in the campaign by the president-elect Luiz Inácio Lula da Silva, such as the payment of R$ 600 from Auxílio Brasil, which will once again be called Bolsa Família, in 2023, in addition to an additional R$ 150 per child up to 6 years old. The minimum wage in 2023 will also be slightly higher from January 1st, R$ 1,320. The Bolsonaro government’s proposal provided for R$ 1,302.

According to the new Minister of Finance, the Constitutional Amendment of the Transition was necessary to rebuild the 2023 Budget and prevent public services and social programs from being interrupted in 2023. [da PEC] allows the rapporteur [do Orçamento] recompose rubrics of people’s rights”, said Haddad shortly after the amendment was approved.

Tax reform and trade agreements

Others priorities for Haddad will be the submission of a tax reform proposal and the adoption of the trade agreement between Mercosur and the European Union. Closed in 2019, the agreement has not yet been ratified by most countries in both blocs.

With regard to tax reform, the minister stated that the government’s proposal will be incorporated into the two proposed amendments to the Constitution (PEC) on the subject being discussed in Congress. Haddad created a Special Secretariat for Tax Reform, led by economist Bernard Appy, who held the same position at the Ministry of Finance between 2007 and 2009, during the second government of Luiz Inácio Lula da Silva.

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