Brazil's Temer says no more tax hikes, for now

President Michel Temer said on Friday that his government has no plans for now to raise taxes again in its effort to meet this year's fiscal target, one day after raising taxes on fuels and announcing an additional spending freeze.

"There is no plan. For the time being, our economic team is just looking at this increase (announced Thursday)," Temer told journalists during a meeting of the South American trade bloc Mercosur. He added: "I don't know if there will be a need for more later, but not now."

In a speech earlier, Temer said Brazilians would understand the need to raise taxes to shrink the budget gap and recover investor confidence in Brazil's overdrawn government accounts.

The tax hike was blasted by business leaders as the wrong way to go in restoring fiscal balance because it would hurt Brazilian's incipient recovery from its worst recession on record.

"Their reaction is natural; nobody wants more taxes. But I am sure this will pass when they understand that meeting the fiscal target is fundamental for the country's stability and encouraging growth," Temer said.

The Finance and Planning ministries announced on Thursday that the government was freezing an additional 5.9 billion reais ($1.9 billion) in federal spending this year, and increasing the federal PIS/Cofins social contribution tax on gasoline, diesel and ethanol to raise about 10.4 billion reais in new revenues.

Brazil plans to cut its budget deficit to 139 billion reais this year before interest payments. Earlier this year it had announced a budget freeze of 39 billion reais to meet that target. The deficit in the 12 months through May was at 167.6 billion reais, equivalent to 2.59 percent of gross domestic product.

Brazil lost its investment-grade rating in 2015 after missing budget targets for years. But slow recovery from a two-year recession has meant dismal tax revenues.

Source: Reuters

Brazil tax revenues rise 3 percent in June from a year ago

Brazil's federal tax collection rose 3 percent in June from the same month a year ago after adjusting for inflation, the country's tax agency said on Wednesday.

The country collected 104.1 billion reais ($33.1 billion) in federal taxes in the month. Tax revenues rose 0.8 percent in the first half of 2017 compared to a year earlier.

Source: Reuters

Brazil delays budget announcement again amid pushback on taxes

The Brazilian government's on Tuesday delayed again the announcement of budget cuts and other measures to meet its fiscal target, and politicians and officials said this reflected growing pressure from lawmakers to avoid or limit tax hikes.

This was the second delay in less than a week. Finance Minister Henrique Meirelles on Thursday postponed the disclosure of budget cuts needed to meet a primary budget deficit goal of 139 billion reais ($44.25 billion).

Meirelles has now pushed the decision until Wednesday as his team scrambles to find extra revenues to help limit tax hikes and budget cuts needed to cover a gap of 52 billion reais.

President Michel Temer's options are limited as he tries to balance market demands for austerity with fears among lawmakers in Congress that tax hikes could undermine an economy struggling with its worst recession on record.

"We are trying to avoid tax hikes altogether or implement hikes that will not have a big impact on the economy and inflation," said a close aide to Temer. "We are carefully looking at all extra revenues we can collect to make the decision."

Newspaper Estado de S.Paulo reported on Wednesday that the government was considering doing away with a need for tax hikes by increasing estimated income from a program for Brazilians to receive amnesty by paying taxes and penalties on undeclared assets held abroad.

Still, members of Temer's economic team told Reuters tax increases seem almost inevitable because a painfully slow recovery has reduced tax collection.

Temer's allies in Congress warn that tax hikes would face resistance among his alliance of more than a dozen parties.

"Congress will have difficulties approving tax hikes, so I believe the government needs to look for better options," Efraim Filho, the lower house head of the Democrats Party, an ally party known as DEM, told Reuters.

Other lawmakers said rolling back tax exemptions, which cost the government 18 billion reais a year, would also face resistance in Congress.

The government is searching for tax hikes that would not require legislative approval such as an increase in the Pis/Cofins federal taxes on gasoline and fuel, a government official told Reuters.

There are about 20 billion reais worth of Pis/Cofins tax exemptions across sectors such as food and beverages, healthcare and ethanol that the government could reverse by decree, economists with BNP Paribas said in a report last week.

Meirelles has ruled out hiking the financial transaction tax, known as IOF, on exchange and overall credit operations but left the door open for small tweaks to the levy on other types of credit.

Court decisions allowing the government to auction hydroelectric plants as well a potential change in the way the government calculates its debts could add nearly 19 billion reais in revenues this year, the government has said.

Source: Reuters

Facebook reports 11-million-pound UK tax credit as revenues soar

Facebook said its main UK subsidiary generated an 11-million-pound tax credit in 2015 even as revenues soared, thanks to its tax efficient structure, accounts published on the weekend showed.

Analysts say Facebook generates hundreds of millions of dollars in revenue from UK clients each year but until this year all transactions were booked in Ireland, minimizing the social media group's UK tax bill.

Facebook UK Ltd is funded by affiliates such as the main Irish unit. It received over 210 million pounds ($261.14 million) in 2015 from these affiliates. But that wasn't enough to cover its costs and the UK subsidiary reported a loss of 52 million pounds.

A spokeswoman said Facebook paid all the taxes it was required to under UK law.

“We are proud that in 2015 we have continued to grow our business in the UK and created over 300 new high skilled jobs,” she added.

UK politicians, spurred by public anger about corporate tax avoidance, have criticized the tax arrangements of Facebook and other U.S. tech giants in recent years. The companies exploit loopholes in U.S. and international tax rules to pay almost no tax on non-U.S. profits.

Last year, the UK government introduced a new tax to target structures like Facebook’s. In March, Facebook said it would begin to report some UK revenues in Britain from 2016, although it’s unclear what impact, if any, this change will have on its tax bill.

Facebook's UK loss was swelled by charges for share incentive schemes, which have not yet vested.

Facebook won’t get the benefit of the tax deduction until this happens, which means the company may still have to pay tax for 2015. Excluding the deduction for share schemes, Facebook would have a tax bill of 4 million pounds for last year.

However, the spokeswoman declined to say if Facebook had paid any tax in respect of 2015.

Facebook reported worldwide net income of $3.7 billion last year, on turnover of $17.9 billion, according to its annual report. European revenue jumped 34 percent last year to $1.4 billion.

Source: Reuters