Brazilian recession prompts financial transactions tax plan
News that Brazil has slipped into a 2% recession has revived the introduction of a financial transaction tax (FTT). If the new tax is not imposed, Brazil is unlikely to hit its 2015 financial deficit targets.
In an effort to win Congressional support for the controversial plan, any proceeds would be divided between the State and Brazilian municipalities.
The tax, known as CPMF, was withdrawn in 2008 as it was believed to be distorting financing across the economy. It included a 0.38% on all financial transactions.
Tax on state development loans
The government has already reintroduced the 1.5% financial transaction tax on loans made from BNDES, the national development bank.
Brazil in 2% recession
Brazil contracted by almost 2% in the second quarter of 2015 compared to the first quarter. This comes despite heavy government spending and interest rate cuts. These proved insufficient to contract a heavy downturn in consumption and poor confidence in shoppers.
Moody’s credit rating agency has cut Brazil to near ‘junk’ status.
European Union Financial Transactions Tax
11 member states of the EU are considering introducing a FTT in 2017. This follows failure to gain a consensus on imposing VAT on EU financial services in 2010.
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