(Adds details on measures, comments, from paragraph 2)
By Aluísio Alves
SAO PAULO, June 16 The Brazilian government,
seeking to unleash more financing for smaller companies, on
Monday eased a series of tax and borrowing rules to fuel more
investment in the struggling sector.
Finance Minister Guido Mantega said investments in shares of
mid-sized companies will be exempted from income tax through
2023. Investor purchases of infrastructure notes, or debt issued
by companies to finance construction and heavy investment
projects, will be exempted from tax on capital gains.
Mantega also announced that mandatory withholding of income
tax on investments, which is known as "come cotas" and for years
has been the target of heavy criticism by investors, will be
eliminated for purchases of exchange-traded fixed-income funds.
The rules will be included in an executive decree within a few
weeks, he said.
The reduction of the capital gains tax is effective
immediately, but the government is unlikely to renounce a
significant amount of tax revenue with the measures, he noted.
"The benefit for the country's smaller companies is evident.
We foresee a more beneficial environment for financing of
mid-sized enterprises - these measures and the growing dynamism
of our capital markets will help companies a lot," Mantega told
The decision comes after years of efforts by government
officials, investment bankers and industry groups to lower the
tax burden on potential sources of funding for infrastructure
and industrial companies. More than 200 companies could take
immediate advantage of these measures, Mantega said.
The government is speeding up targeted reductions in taxes
on financial investment, borrowing and other financial
instruments to revive investment, which is currently at the
lowest level in more than three years and is slowing economic
growth in Latin America's largest economy.
In recent months, demand for corporate loans has stagnated
in the wake of a jump in domestic borrowing costs. The central
bank raised the benchmark Selic overnight lending rate to the
highest level in more than two years to head off inflation.
As a result of that and because of growing uncertainty over
the economic outlook, no initial public offerings have been
registered this year - the worst start to a year in Brazil since
at least 2004. Bond offerings are down in the first five months,
compared with the same period a year earlier, data by Thomson
(Reporting by Aluísio Alves; Writing by Guillermo Parra-Bernal;
Editing by Chizu Nomiyama and Dan Grebler)