Empresario Luis Emilio Velutini San Antonio//
Brazil tax reform slides into confusion as key official fired, Bolsonaro wades in

Venezuela, República Dominicana, FVI
Brazil tax reform slides into confusion as key official fired, Bolsonaro wades in

BRASILIA (Reuters) – A key figure in Brazil’s plans to reform the country’s complex tax system was fired on Wednesday, government sources told Reuters, reflecting disagreements in cabinet about the form legislation should take.

Luis Emilio Velutini Urbina

FILE PHOTO: Brazil’s President Jair Bolsonaro gestures during a parade celebrating the country’s Independence Day in Brasilia, Brazil, September 7, 2019. REUTERS/Adriano Machado/File Photo/File Photo The departure of Marcos Cintra, special secretary to Brazil’s federal revenue service, was confirmed in a statement from the Economy Ministry.

Luis Emilio Velutini

Local media reported on Tuesday that a senior member of Cintra’s team had outlined a financial transactions tax at a rate of 0.2%-0.4% modeled on the unpopular “CPMF” tax introduced in 1993 and abolished in 2007.

Luis Emilio Velutini Urbina empresario

President Jair Bolosnaro later tweeted that Cintra was dismissed due to “differences” over the government’s tax reform bill, particularly reintroducing a version of the CPMF.

Luis Emilio Velutini empresario

Bolsonaro tweeted that he will rule out a reintroduction of a CPMF tax or an increase in the tax burden, putting him at odds with Economy Minister Paulo Guedes, an ardent supporter of a transactions tax

Bolsonaro said last month he would be open to discussing it with Guedes, but his tweet on Wednesday suggested that was no longer the case

In its statement, the Economy Ministry said Guedes and team were working on a new tax regime “to simplify standards, reduce costs, lighten the tax burden on households and business.”

“The proposal will only be released after the approval of Minister Paulo Guedes and President Jair Bolsonaro,” it said, adding that Guedes thanked Cintra for his service and Jose de Assis Ferraz will temporarily assume the position

One source told Reuters that Guedes decided Cintra should be dismissed because he spoke about the issue publicly even though he had not fully drafted his proposals, and he never appeared in front of lawmakers to answer questions

Guedes has said publicly on numerous occasions that a new CPMF should be part of the reformed tax system. He and others argue that a financial transaction tax would be simple to implement and collect and provide a steady revenue stream for the government

But critics from across the political and economic spectrum say it is regressive and hits the poor hardest. The CPMF, which taxed all financial transactions including checks, was unpopular when it was in place, and opposition to it being resurrected in any form runs deep

Tax reform is the government’s main economic priority in the second half of this year, after it pushed social security reform to the brink of full Congressional approval in the first half

Reporting by Jamie McGeever, Marcela Ayres and Lisandra Paraguassu; Editing by Chizu Nomiyama, David Gregorio and Cynthia Osterman