Brazil’s Tax Proposals for 2025

BRASILIA (Reuters) – Brazil’s Finance Ministry is set to submit proposals to Congress this year aimed at taxing large tech companies and instituting a global minimum tax of 15% on multinational corporations to meet the 2025 fiscal goals, particularly in case of revenue shortfalls.

During a recent press conference, the ministry’s executive secretary, Dario Durigan, articulated that this plan aligns with global tax cooperation discussions Brazil has been spearheading as chair of the G20 forum of major economies. “They take time to be implemented given the difficulties in obtaining approvals from various countries, but the idea is to bring the lessons learned,” he stated regarding the tax discussions.

In the 2025 budget bill presented to Congress on Friday, the Finance Ministry anticipates a primary surplus of 3.7 billion reais next year, estimating potential revenue of 17.9 billion reais from increased income taxes.

Additionally, a separate bill submitted to lawmakers proposes adjustments to the social contribution tax on corporate income (CSLL) and interest on equity payments (JCP). Durigan highlighted that the government is relying on these revenues, which are part of a broader package amounting to 46.7 billion reais. This package also includes the end of certain tax waivers on payrolls for companies in specific sectors and smaller municipalities, a contentious tax benefit that the government previously attempted to eliminate.

A Senate-passed bill, pending approval from the Lower House, retains the tax benefits while postponing the fiscal compensations to 2024. Durigan indicated that the Supreme Federal Court has already determined that without this balance, such tax waivers could not be granted.

The ministry projects raising 58.5 billion reais from tax negotiations next year, with a considerable 30 billion reais expected from a new dispute resolution program for large taxpayers, scheduled for launch in 2025, stemming from an agreement with state-owned oil giant Petrobras. “Companies that approached us estimate paying 130 billion reais in settlements, but we included 30 billion reais in the 2025 budget bill,” the ministry declared.

An additional forecast suggests 28.5 billion reais could be secured through decisions made by Brazil’s Federal Administrative Council of Tax Appeals (CARF), which deals with taxpayer administrative issues. Furthermore, correcting tax distortions is expected to yield another 20 billion reais in revenue next year.

Rafaela Vitoria, chief economist at Inter Bank, pointed out that the 2025 budget bill consists of tax increase proposals whose approval is questionable, which may lead to disappointment. She anticipates a deficit of 110 billion reais or 0.9% of GDP for 2025 in a correspondence to clients.

Economists surveyed weekly by the central bank also express skepticism regarding the government’s fiscal strategies, forecasting a primary deficit of 0.76% of GDP in 2025, following a 0.6% shortfall this year, despite a deficit target of zero in both years.