Brazil investors seek tax breaks on debt-report

SAO PAULO, Brazil Aug 6 (Reuters) - Brazil's securities industry will propose measures to help boost liquidity in corporate debt, with a focus on tax relief aimed at increasing the appetite of local investors, Valor Economico said, citing a draft to be presented to regulatory authorities on Thursday.

The Master Plan for the Capital Markets, elaborated by a committee of dedicated local fixed-income investors, will propose as many as 50 recommendations to help consolidate the corporate debt market in Latin America's largest economy. The plan will be presented at a securities conference in Rio de Janeiro.

Investors told Valor that taxation remains the biggest hurdle to the development of a secondary market for corporate bonds, notes and asset-backed securities in Brazil.

The fact that income taxes on bonds are accrued since the issue date and buyers in the secondary market will bear all of them pose a significant problem for holders, Valor said, citing Andre Franco de Moraes, finance professor at Sao Paulo-based university Insper.

The government for years has been studying plans to stoke the corporate debt market and entice more capital spending in the economy, but attempts failed on concerns the changes might reduce tax receipts.

Currently, foreign investors, unlike ones based in Brazil, are exempted from some taxes on their corporate debt holdings, Valor said. Local investors want equal taxation treatment to boost debt purchases, the daily said.

Sales of fixed-income instruments tumbled 29 percent in the first seven months of 2009, the nation's securities industry association said on Wednesday. Sales of asset-backed notes tumbled to a four-year low, reflecting the toughest capital market conditions in almost eight decades, the association, known as Anbid, said.

(Reporting by Guillermo Parra-Bernal, Editing by Chizu Nomiyama)