Home News News from PKF Brazil Government wants to reduce tax burden and tax dividends

Have a question?

News from PKF Brazil • 2019-02-01

Government wants to reduce tax burden and tax dividends

Economy Minister Paulo Guedes said in Davos on Wednesday that the government's intention is to reduce the tax burden currently paid by companies to 15 percent on average by 34 percent.For this, however, it will make offsets with other rates, such as Interest on Own Capital (JCP) and dividends.

In an interview, he explained that the motivation of this tax reorganization is to attract foreign investors and that he would have no better place to talk about the subject than the World Economic Forum in Davos.

"Today, corporate tax is 34%. If it goes down to 15%, then it is necessary to raise the dividend tax to stay the same," he said.

The minister argued that the reduction is necessary because "everyone is lowering" the taxes. In the United States, he pointed out, the load on the productive sector is 20%. "So, if Brazil does not lower taxes for companies, no company goes to Brazil. It ends up going elsewhere," he said.

Guedes argued that the only way to do this without overturning the revenue is by reallocating the tax burden.

"If you drop one, make up with another and stay the same, it's the same taxation practically," he explained. "If we drop corporate tax and the dividend by 20%, we continue with the same taxation, but we encourage companies to go to Brazil," he added.

Companies currently pay 34% of their profits and, after taxation, dividends are distributed without charge of Income Tax on those gains.

On Tuesday (29), Governor João Doria signed a decree exempting the Tax on Transactions of Goods (ICMS) of horticultural products, extending the benefit to fruits, vegetables and vegetables that are packaged or cooled, even if they have been cut or stripped.

The minister stressed that it is a "tax substitution" program and has ensured that there will be no tax increase. "It lowers one and rises the other to be more or less the same." "Our essence is a tax substitution, there are people who do not pay, there are people who pay too much," he said. The strategy will, according to him, attract foreign capital to Brazil. "The focus here is on Davos, I'm talking to companies: 'in the US, (taxes) are 20%, here's going to be 15%, so come here.'"

The Minister of Economy also confirmed to the Secretary General of the Organization for Economic Cooperation and Development (OECD), José Ángel Gurría, that he wants to make the process of Brazilian access to the multilateral body as soon as possible.

The country began the proceedings in 2017 and awaits the approval of the members of the entity to continue the process. Not only Brazil, but also other countries are waiting for approval that is being blocked by the United States, which is against the increase in the number of participants in the institution that has been called the "club of the rich" and against multilateral organizations in general. The country also contributes most of the institution's budget.

"The meeting with the minister was very positive, very constructive," he told reporters after meeting with Guedes at a bilateral meeting during the World Economic Forum in Davos, adding that a zone of comfort, of trust between the parties was planted today .

"The minister shared with us his plans and programs to start with domestic things and then go to international things. You know, he has an ambitious domestic program," he said.

Fonte: Diário do Comércio

See more News from PKF Brazil items