Tax Exemptions in Brazil Affect Federal Revenues for 2014

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Tax exemptions and reductions given by the Brazilian government to major industry sectors were greatly responsible for the significant decline in federal revenues from January to November which in turn affected public accounts, says Brazil’s Receita Federal (Federal Revenue Service).

According to news agency, Agencia Brasil, data from Brazil’s Federal Revenue Service shows that the government obtained R$22.815 billion less this year from taxes and a great part of it was due to tax exemption and reduction given by the Rousseff Administration to important sectors of the economy.

The official data shows that in the first eleven months of 2014 federal revenues totaled R$1.07 trillion, 0.99 percent below that registered during the same period last year.

To encourage consumption, the government has exempted or reduced taxes on goods from important industries such as new automobiles, furniture, and large household appliances such as refrigerators and stoves in addition to exemptions given in the Brazilian Cesta Basica (Staple Foods Basket). With these reductions and exemptions the federal government lost a significant volume of revenues.

At the beginning of 2014 the Federal Revenue Service had forecast an increase of 3.5 percent in revenues. As the year advanced, that forecast was revised to two percent and later to one percent. In November the forecast was of a zero growth in federal revenues in 2014. If this result is confirmed it will be the first time since 2009 that real federal revenues (after deducting inflation) will register a decline.