Brazil’s Finance Minister Fernando Haddad announced that the government will cut at least R$15 ($2.7)billion in tax breaks this year to help balance the country’s budget.
This decision follows Congress blocking an increase in the IOF, a tax on financial transactions, which the government had hoped would raise significant revenue.
Originally, the government wanted to cut R$40 billion in tax incentives. After talks with Congress, Haddad agreed to focus only on tax breaks that are not protected by the Constitution, which led to the smaller R$15 billion target.
Haddad stressed that he remains open to discussions with lawmakers to find solutions and keep the budget on track. Congress’s decision to block the IOF increase created a gap in government revenue plans.
The government now needs to find other ways to raise money. Haddad explained that the government has sent eight proposals to Congress to reduce spending.
These include limiting very high public sector salaries, reforming military pensions, and tightening rules for some social benefits. So far, Congress has approved only two of these proposals.
Haddad Seeks Fairer Tax Reform by Targeting Corporate Loopholes
Haddad said he wants to return to the table with Congress to discuss both tax and spending measures. He emphasized that the government’s aim is not to create division between rich and poor, but to fix a system where many people avoid paying taxes while most Brazilians do pay.
He pointed out that Brazil’s tax system is often criticized for being unfair and complicated. The Finance Minister also mentioned that the government does not plan to cut individual income tax benefits in the current reforms.
Instead, the focus is on reducing tax breaks for companies and sectors that are not guaranteed by the Constitution. Haddad argued that closing loopholes and reducing unnecessary benefits will help the country’s finances and make the system fairer.
Looking ahead, Brazil faces pressure to increase revenue by R$118 billion to meet its 2026 budget goals. Haddad said the government is committed to finding solutions that do not harm essential social programs.
He believes that if the government and Congress can agree on these measures, Brazil can avoid deeper cuts and keep its economy stable. Haddad made it clear that he cannot force Congress to act but will keep working to find common ground.
He said the government’s efforts to balance the budget are not just about politics but about fulfilling its duty to manage the country’s finances responsibly.