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LatinNews Daily - 11 June 2024

In brief: Tensions rise over limits on tax breaks in Brazil

*Brazil’s finance minister, Fernando Haddad, has signalled that the government is willing to negotiate the terms of a controversial decree to raise more tax revenue which President Luiz Inácio Lula da Silva signed last week. The ‘medida provisória’ (MP) decree was signed on 4 June and placed restrictions on tax benefits applied to the PIS and Cofins federal consumption taxes. The government has estimated that limiting PIS/Cofins tax breaks could raise around R$29.2bn (US$5.5bn) in additional tax revenue this year. MPs are decrees that take immediate effect but are only valid for 120 days; for the measure to be extended beyond the 120-day period, the approval of congress is required. In recent months, tensions have intensified between the government and congress over the Lula administration’s efforts to raise revenue and balance the books, and Haddad has had negotiate to ease the tensions over taxes in meetings with leading members of congress, such as the senate president, Rodrigo Pacheco. According to reports in the national media, Lula held a meeting with Haddad and Pacheco yesterday during which the senate president urged Lula to either withdraw the decree or propose a new measure which would be more favourable to business groups, the interests of which are backed by congressional lobbies. The conservative Progressistas party (PP), with strong ties to the agribusiness caucus, has even challenged the tax measure at the supreme court (STF), filing a ‘direct action of unconstitutionality’ (ADI) petition against the MP.

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