BRASILIA (Reuters) – Brazil’s government outlined an ambitious plan to rescue its public accounts from deficit which hinges on securing 168.5 billion reais ($34 billion) in extra revenue, according to the 2024 budget bill sent to Congress on Thursday.
The proposal forecast that the central government – comprising the Treasury, central bank, and social security – would end next year with a primary surplus of 2.8 billion reais ($565.7 million), adhering to the official goal of a zero deficit.
The figure would imply a significant turnaround from the government’s projected primary deficit of 145.4 billion reais for this year.
Its feasibility is viewed with skepticism within the market, primarily due to its substantial dependence on initiatives whose capacity to generate revenue remains uncertain or that pend approval from Congress, where the government of leftist President Luiz Inacio Lula da Silva lacks a consolidated majority.
This package of measures includes Congress-approved changes to tax trial regulations that raise the bar for companies to successfully contest their tax bills, but also involves other bills that are currently pending votes, such as the regulation of sports betting, along with proposed taxation adjustments for closed-end and offshore investment funds.
Finance Minister Fernando Haddad expressed confidence in the government’s fiscal pursuits in a press conference earlier on Thursday, citing the recently dispatched revenue-boosting initiatives.
He highlighted a fresh proposed bill aimed at formalizing a court ruling dictating that corporate tax discounts granted by states can no longer be used to reduce companies’ taxable income for federal revenue purposes.
Earlier on Thursday, the government also sent to Congress another bill within the package to boost revenue by prohibiting the shareholder payment instrument “interest on equity” (JCP) from being deducted from companies’ corporate tax obligations, starting in January 2024.
The budget proposal was founded on the government’s projections of 2.3% growth in GDP and an inflation rate of 3.3% for 2024.
However, private economists surveyed weekly by the central bank hold a more pessimistic outlook, estimating the economy will expand by 1.33% next year and the inflation rate will reach 3.87%.