Economic growth and tax measures for the super-rich have once again improved federal revenue. In August, federal government revenues totaled R$201.6 billion, an increase of 11.95% above inflation compared to the same month last year. According to the Federal Revenue Service, this is the highest amount for the month since the beginning of the historical series in 1995.
From January to August, revenues totaled R$1.7 trillion, an increase of 9.47% above inflation compared to the first eight months of last year. The amount is also a record for the period.
According to the Federal Revenue Service, the record collection in 2024 is mainly due to the following factors: real growth (above inflation) and 19.31% in Income Tax Withheld at Source on Capital (IRRF-Capital); real growth of 19.34% in revenues from the Social Integration Program (PIS) and the Contribution for the Financing of Social Security (Cofins); real growth of 17.99% in Personal Income Tax (IRPF) and behavior of macroeconomic variables, which reflect the growth of the economy.
Regarding IRRF-Capital, the increase in revenue is a result of the taxation of exclusive funds, approved at the end of last year, which brought forward the collection of the tax. The increase in PIS/Cofins revenue reflects the growth in sales. This is because both taxes are levied on revenue and are directly linked to consumption.
According to the IRS, the increase in IRPF collection is due to the updating of assets and rights abroad determined by the new Offshore Law (investment companies abroad). At the beginning of the year, taxpayers had to update assets and investments in other countries.
In relation to macroeconomic variables, the increase in revenue is a reflection of the growth of the Brazilian economy in 2024. At the beginning of the month, the Brazilian Institute of Geography and Statistics (IBGE) announced that the Gross Domestic Product (GDP, sum of wealth produced) grew 1.4% in the second quarter. The numbers above expectations led the Economic Policy Secretariat of the Ministry of Finance to raise the GDP growth forecast for 2024 to 3.2%.
Fiscal target
Despite record revenue, the government faces challenges in meeting its 2024 fiscal target. This year’s Budget Guidelines Law (LDO) establishes that the Central Government – National Treasury, Social Security and Central Bank – must register a zero primary deficit, with a tolerance margin of R$28.8 billion, either way.
The primary result represents the positive or negative balance in the government’s accounts without interest on the public debt. To reach the center of the zero primary result target, the government needs an additional R$168 billion this year. Despite the growth in revenues from exclusive funds and offshore companies, the economic team is facing difficulties in other sources of funding that have been delayed, such as the government’s tie-breaking votes in the judgments of the Administrative Council of Tax Appeals (Carf).
The new revenue estimate for Carf, the Federal Revenue agency that judges debts of large taxpayers, will be released this Friday (20). On that occasion, the Ministries of Finance and Planning will release the Bimonthly Revenue and Expenditure Assessment Report, a document that guides the execution of the Budget.
