The Brazilian government is considering reviving a financial transaction tax known as CPMF in a bid to shore up its finances in 2016, two sources close to President Dilma Rousseff's economic team said on Thursday. A plan to recreate the CPMF is part of the budget proposal for 2016 that is being discussed by Rousseff and her economic team, said the sources, confirming reports published by newspapers Valor Economico, O Estado de S.Paulo and O Globo.
The last CPMF consisted of a 0.38 percent charge imposed on nearly every financial transaction in Brazil. It was eliminated in 2008 in a major defeat for then-President Luiz Inacio Lula da Silva, and subsequent attempts at reinstating it have failed. Chances remain slim that the tax would be approved in Congress, lower house speaker Eduardo Cunha said on Thursday. "I'm against it and I think it's unlikely that it would be approved here," Cunha told reporters in Brasilia. In a bid to reduce political resistance to the tax, the government now considers sharing part of its proceeds with states and municipalities, one of the sources said.
Yet the plan is not consensual even among Rousseff's economic team. "The finance ministry defends deeper expense cuts rather than tax increases," said the other source on condition of anonymity. Faced with what is expected to be the worst recession in 25 years, the Brazilian government has been forced to lower its fiscal savings goals because of a sharp plunge in tax revenue. Bringing back the CPMF would be part of a strategy that includes planned asset sales and spending cuts to achieve a primary surplus target of 0.7 percent of GDP in 2016.