Brazil: Finance Minister Haddad defends fiscal framework in communiqué to IMF

The Minister of Finance, Fernando Haddad, defended on Tuesday (11) the new fiscal framework in a statement to the Monetary and Financial Committee of the International Monetary Fund (IMFC).

The minister presented a summary of the government’s economic proposals in the document.

For Haddad, the new fiscal rule “can credibly stabilize the public debt.

“We present to Congress and society a new fiscal framework that can credibly stabilize public debt over time and, subsequently, place it on a clear downward trajectory,” the document emphasized, Agência Brasil reported.

Haddad reiterated the commitment to end 2026 with a primary surplus (positive result in the government’s accounts without the interest on the public debt) of around 1% of the Gross Domestic Product (GDP, the sum of the wealth produced in the country).

“Our goal is to bring the poor into the budget and the rich into the tax system,” Haddad emphasized in the document.

With the official trip to China, the minister will not participate in the Spring Meeting of the IMF and the World Bank, held this week in Washington.

The document is signed by Brazil and ten other countries represented by the Brazilian seat in the body.

TAX REFORM

Haddad also mentioned that the government is working with the National Congress to allow the approval of a tax reform that corrects distortions and results in structural changes in the Brazilian economy.

The minister cited results such as simplifying legislation and procedures, ending the tax war between states, and increasing transparency and fairness in the system.

“The main objective [of tax reform] is not to increase revenue but to improve the quality of revenue mobilization.”

“Brazil’s tax system is overly complex, regressive, distorted, and burdensome.”

“It unduly burdens companies and accentuates regional and social inequalities,” said the minister.

The tax reform is planned in two phases.

In the first half of the year, the government intends to reform consumption taxes, creating a dual value-added tax (VAT) (one part collected by the Union and another by states and municipalities).

In the second half of the year, the government plans to reform income tax and the taxation of corporate profits.

According to Haddad, the government will also take advantage of the tax reform to review tax incentives to certain sectors of the economy.

According to the minister, reviewing tax expenditures – how much the government stops collecting with the incentives – is necessary to fight the “State capture” by certain sectors of the economy and make the Brazilian tax system more fair and progressive.

He emphasized that the 27 governors supported the tax reform proposal.

PROTECTIONISM AND ITS IMPACT ON DEVELOPING COUNTRIES

In another section, the document warned about the risk of global economic fragmentation, brought about by the growth of protectionism and the concentration of trade and investment flows between countries with the same geopolitical alignment.

According to Haddad, industrial policies in advanced economies, which have started to adopt protectionist measures and subsidize local industries, may worsen the situation in developing countries.

“The reduction in global activity, less vertical integration of companies, open or disguised protectionism, and the detour of investments can worsen the situation.”

“We are convinced that ensuring an international economic order based on rules that promote economic integration, diversification of production, knowledge sharing, and less poverty and inequality is the best way to avoid further fragmentation,” the minister said in the document.

With information from Gazeta do Povo

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