Brazil’s Government Considers Taxing Big Techs if Revenue Falls Short – Reuters

BRASILIA (Reuters) – Brazil’s Finance Ministry plans to submit proposals to Congress this year aimed at taxing large technology companies and instituting a global minimum tax of 15% on multinational corporations to meet the fiscal goals for 2025, especially if there is a revenue shortfall.

At a recent press conference, Dario Durigan, the ministry’s executive secretary, stated that the proposed measures align with ongoing discussions on global tax cooperation, which Brazil has been spearheading as the chair of the G20 forum of major economies. Durigan noted that these initiatives take time to implement due to the complexities involved in getting approvals from various nations, but emphasized the importance of learning from these discussions.

In a presentation regarding the 2025 budget bill submitted to Congress, which anticipates a primary surplus of 3.7 billion reais for the following year, the Finance Ministry estimated that an increase in certain income taxes could yield an additional 17.9 billion reais in revenue.

Additionally, the government submitted a separate bill proposing modifications to the social contribution tax on corporate income (CSLL) and on interest payments to equity (JCP). Durigan indicated that the government is relying on these revenues as part of a broader fiscal package totaling 46.7 billion reais, which also includes an end or due compensation of tax exemptions on payrolls for companies in certain sectors and smaller municipalities—an issue that has been contentious and previously attempted but not succeeded in eliminating.

A bill that has been passed by the Senate awaits approval from the Lower House and continues to preserve the tax benefits while only applying fiscal compensation to 2024. Durigan highlighted that the Supreme Federal Court has already indicated that these tax waivers could not be maintained without proper fiscal balance.

The ministry anticipates raising 58.5 billion reais from tax negotiations next year, which includes 30 billion reais from a new dispute resolution program for large taxpayers, set to launch in 2025 following a settlement reached this year with state-owned oil company Petrobras. Companies that approached the ministry estimated potential settlements of 130 billion reais, but the ministry incorporated 30 billion reais into the 2025 budget bill.

Furthermore, an additional 28.5 billion reais is expected from rulings by Brazil’s Federal Administrative Council of Tax Appeals (CARF), which deals with taxpayer administrative cases. The ministry also predicts that correcting existing tax distortions will contribute another 20 billion reais in revenue for next year.

Rafaela Vitoria, chief economist at Inter Bank, expressed skepticism about the budget bill, highlighting that it contains proposed tax increases that are unlikely to be approved, along with other initiatives that may not be realized. She projected a deficit of 110 billion reais, or 0.9% of GDP, for 2025, as noted in her communication to clients.

Economists surveyed by the central bank are similarly doubtful regarding the government’s fiscal strategies, forecasting a primary deficit of approximately 0.76% of GDP in 2025, following a 0.6% deficit this year, in contrast to a target of zero for both years.