Brazil's President-elect Jair Bolsonaro is considering three models of tax reform: a gradual adjustment program, the application of a value added tax o a broader plan that includes a tax on financial transactionsYes, said a source with direct knowledge of the proposals.
Bolsonaro was elected president in October 2018 on market-friendly promises including privatizations, cost cutting, pension reform and fiscal deficit control.
Economists have often criticized Brazil's complicated tax system. as a barrier to long-term growth. Companies spend an average of 2.038 hours preparing their tax returns, or about 12 times the average in rich countries of the Organisation for Economic Co-operation and Development (OECD), according to the World Bank's "Doing Business" index.
The source said Bolsonaro's team has not yet decided on any of the three proposals. One of his advisers, Marcos Cintra, has often publicly advocated a tax on financial transactions.
Brazilian Congress Plan
Brazil's Congress has been working on a tax reform plan of its own which supports the adoption of a value-added tax.
Some congressmen have said they want to see the plan approved before the end of the year.But that would require a constitutional amendment, which under Brazilian law cannot be put to a vote until a federal military security intervention in the state of Rio de Janeiro is suspended.
Bolsonaro will take office as President of Brazil on January 1, 2019.
"The mood in the House of Representatives and the Senate is 100% in favour of approving the creation of a value-added tax this year," said Luiz Carlos Hauly, the deputy responsible for the plan.
Cintra has said in the past that a value-added tax “would be disastrous” and that “tax reform requires a way of collecting taxes based on the electronic cash flow of the banking system.”
Source: Reuters
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