Brazil finance minister says tax rise still a possibility

Finance Minister Henrique Meirelles said that, if the revenue forecast proves inaccurate, the government will not refrain from considering “specific [tax] increases” to balance out public accounts and keep the deficit below the $41.5 billion predicted for the fiscal target. The statement was made Monday (Jul. 24).

Up to the end of August, the economic staff will keep watch over the growth of public revenues, as projected for 2016 and 2017, and the possible inflow of funds from privatizations, concessions, and grants. “We'll make predictions, and, if necessary, we will make specific increases, but only if necessary, since it might prove unnecessary,” the minister said during a seminar promoted by the Getúlio Vargas Foundation, in Rio de Janeiro.

Meirelles said that the federal government may cover a portion of the states' deficits if conditions are favorable. Nonetheless, he says, this will only happen if public revenues expand in the upcoming months and in case the expected mandatory expenditures materialize, with a surplus for the target.

“In case we have already hit rock bottom; in case, as previous indicators have showed, activities pick up in the next months; in case the revenue recovers and there's enough leeway—which indeed depends on a solid economic recovery—then we could avail ourselves of this legal provision, which says: The federal government may, in case there is enough leeway, compensate for an increase in the states' deficit,” he argued.

Meirelles noted that the government's only expressed commitment is meeting the target. “The federal government's target will not undergo any changes, as was the case several times in the recent past,” he declared.

Translated by Fabrício Ferreira