Brazilian federal tax revenues grow 5.27% to reach record in February

RIO DE JANEIRO, BRAZIL – Due to the economic recovery and rising international oil prices, federal tax revenues reached record levels in February.

According to data released today (28th) by the Federal Tax Service, the government collected R$148.66 (US$31.7) billion last month, an increase of 5.27% above inflation, adjusted by the National Wide Consumer Price Index (IPCA).

The amount is the highest in history for the month of February since the beginning of the Federal Revenue Service’s historical series in 1995, in inflation-adjusted values.

In January and February, federal tax revenues totaled R$383.99 billion, outpacing inflation by 12.92%, also a record for the period, according to IPCA.

The revenues exceeded the forecasts of financial institutions. In the “Fiscal Prism” report, a study issued by the Ministry of Economy, market analysts estimated, based on the median criterion (the central value around which a data point fluctuates), that revenues in February would be R$145 billion.

The recovery of the economy is driving tax revenues. However, atypical factors and legislative changes have also contributed to the increase.

COLLECTIONS

One of the factors that boosted tax collections in recent months, the atypical collection of the corporate income tax (IRPJ) and the social contribution on net profits (CSLL), was not repeated in February. In the same month last year, there was an atypical collection of R$5 billion in IRPJ and CSLL, which was not repeated this year.

Even without the February increase, atypical tax collections continue to contribute to the increase in tax revenues in the first two months. In January and February, these revenues totaled R$12 billion, compared to R$6.5 billion in the same period last year.

Throughout 2021, these off-season collections have boosted revenues as companies made higher-than-expected profits and paid the difference in arrears. Due to tax secrecy, the tax authority cannot disclose the names and activities of these large companies.

The increase in the IOF tax, which took effect at the end of November to fund Auxílio Brasil, also contributed to the improvement in tax collection. IOF revenues increased by R$945 million in February, 26.28% above the inflation rate compared to the same month in 2021.

TAXES

In the breakdown by tax, the highest increases in February – compared to the same month of 2021 – were recorded in the Social Integration Program (PIS) and Social Security Financing Contribution (Cofins) collections, which were R$2 billion (6.68%) above inflation based on the IPCA.

According to the Federal Tax Service, the development of the financial sector and the increase in fuel prices have increased tax revenues. The February figures do not yet take into account the reduction of the PIS/Cofins on diesel, cooking gas, and aviation fuel to zero, which will remain in effect until the end of the year.

In second place is the withholding tax on investment income, whose revenues increased by R$1.84 billion (57.77% above inflation) thanks to better returns from funds and fixed income securities. In third place is social security revenue, which was R$1.31 billion (3.3%) above inflation, due to the improvement of informal employment. IOF is in fourth place.

OIL

The largest jump in tax revenues occurred in revenues administered by other agencies, which totaled R$6.07 billion, 79.77% above the IPCA compared to February last year. The main reason for this was the increase in oil prices on the international market caused by the conflict between Russia and Ukraine.

In 2022, oil royalty collections totaled R$19.55 billion, 71.2% higher than the IPCA’s official inflation rate compared to the first two months of last year.