Subsidy cuts to offset IOF could reach R$20 billion, says Finance Secretary

The executive secretary of the Ministry of Finance, Dario Durigan, projects that the government can save R$20 billion with the linear cut in subsidies that was announced as a way of compensating for the reduction in the increase in the IOF, last week.

The linear cut in tax breaks is expected to be presented to Congress next week and is expected to reduce tax benefits granted to some specific sectors of the economy. The subsidies currently cost R$540 billion, according to Budget data.

“If there is a reduction in the tax base, if there is a zero tax rate, if there is some presumed credit incentive. If there is any of these benefits, the proposed law will automatically also state the consequences. The forecast is a 10% reduction within a universe,” said the secretary in an interview with the newspaper O Globo published this Wednesday (18).

Durigan is replacing Minister Fernando Haddad in the portfolio during his vacation , marked at a time of crisis in which the government saw the urgency of a Legislative Decree Project (PDL) that suspends the effects of the IOF recalibration being approved last Monday (16).

Despite the linear cut in subsidies, the secretary stated that policies such as Simples Nacional and the Manaus Free Trade Zone, considered strategic and highly politically sensitive, should be maintained.

“This decision is for Congress to make. From the point of view of the economic team, the Treasury, the more sectors, the more benefits we get, the better. I will have a linear approach and less discussion about asymmetry, that I am choosing one sector over another,” he pointed out.

The Ministry of Finance is studying two possibilities to forward the proposal: taking advantage of a project that is already being processed in the Chamber of Deputies or drafting an entirely new text.

The review of tax benefits appears as an alternative to make up for the losses in revenue caused by the relaxation of the increase in the IOF (Tax on Financial Operations), decreed in May and which was expected to generate R$19 billion in 2025. After a strong reaction from the productive sector and Congress itself, the government partially withdrew the measure.

The climate in Congress, however, remains unfavorable for the economic team. On Monday (16), the Chamber of Deputies approved, by 346 votes in favor and 97 against, the urgent regime to vote on the repeal of the decree that increased the IOF, representing a defeat for Haddad.