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Guedes Cancels Agenda in Rio Amid News About Tax Changes

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Economy Minister Paulo Guedes on Friday canceled a schedule he would have in Rio de Janeiro with the president of the Brazilian Securities and Exchange Commission (CVM), Marcelo Barbosa, amid reports of tax changes involving IOF and decrease of the burden on income.

The meeting of Guedes would initially take place at 11 am and had been rescheduled at 5 pm. The cancellation was informed by the ministry’s advisor, who could not immediately inform the reason.

Earlier, President Jair Bolsonaro said that Guedes would announce today a decrease in aliquots for the Income Tax (IR). He said the higher tax rate, now at 27.5 percent, would rise to 25 percent.

The statement that the income tax ceiling will be lower than the current one comes after the Special Federal Revenue Secretary, Marcos Cintra, has defended this week a reduction of IR rates for companies and individuals, but also the creation of additional rates for holders of larger incomes.

Bolsonaro also said earlier that the Tax on Financial Transactions (IOF) rate would be high for “those who have applications out there” as a way to offset the extension of fiscal benefits to the North and Northeast Regions.

The president sanctioned a law that extends fiscal incentives for companies installed in the areas of operation of the Amazon Development (Sudam) and Northeast (Sudene) Superintendencies.

By determination of the Fiscal Responsibility Law (LRF), these cases require compensation from the fiscal point of view, which can happen through an increase of taxes or reduction of tax benefits.

This afternoon, however, after meeting the president with Cintra, the secretary said that there will be no increase in the IOF rate.

According to Cintra, in practice, compensation of resources will not have to be made since Bolsonaro has limited the use of the benefits in both regions to the availability of budgetary resources provided for in the 2019 budget law.

“The impact in 2019 will not be legally and there will be no legal basis,” Cintra told reporters in the Planalto Palace. “Legally because there is no need for compensation, resources will not be used beyond what is foreseen in the 19 Budget.”