June 16, 2015 / 8:12 PM / 4 years ago

Brazil's gov't could raise 3 bln reais with tax breaks deal

BRASILIA, June 16 (Reuters) - Brazil’s government could increase tax revenues by about 3 billion reais ($970 million) this year after striking a deal with members of Congress to unwind tax breaks on payrolls, the lawmaker drafting the changes said on Tuesday.

The government has agreed to keep some of the tax breaks on four of the 56 sectors of the economy that have benefited, passenger transport, call centers, media, and staple food producers, said Leonardo Picciani, leader of the opposition PMDB party in the lower house of Congress.

The bill is important for Finance Minister Joaquim Levy as he seeks to save 66.3 billion reais in the government’s budget this year, the equivalent of 1.1 percent of gross domestic product. The budget target has been closely watched by ratings agencies, which have threatened to cut Brazil’s credit rating closer to junk status.

Jose Guimaraes, leader of Brazilian President Dilma Rousseff’s Workers’ Party in the lower house of Congress, told journalists the bill could be approved by both chambers and signed into law by June 30.

The government’s original proposal on the payroll tax breaks, put forward by Rousseff in a temporary decree in February, was to raise 5 billion reais in revenue in 2015 and 13 billion reais in 2016.

It proposed a more than doubling of the social security tax rate on corporate gross revenue, effectively reducing payroll tax breaks for 56 sectors that were costing the government about 25 billion reais a year in forgone revenues.

Rousseff’s decree was thrown out by Senate Speaker Renan Calheiros, forcing the government to put forward the changes in a bill.

“Approving 85 or 80 percent of the tax increases planned by the government is better than seeing the whole project rejected by Congress,” Picciani told journalists.

$1=3.09 Brazilian reais Reporting by Alonso Soto and Maria Carolina Marcello; Writing by Silvio Cascione; Editing by Peter Galloway

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