(Bloomberg) — Brazil has decided to extend a corporate payroll exemption program until 2023 without adopting measures to compensate for the loss of revenue, according to a statement released by the Presidency’s General Secretary.
The new program, which will cost public coffers around 9 billion reais ($1.6 billion), is already included in the 2022 budget bill and doesn’t require extra compensation measures, said the statement. The economic team was studying the possibility to use a tax on financial transactions, known as IOF, to offset the tax break on payrolls.
The IOF rate was temporarily raised last year to finance President Jair Bolsonaro’s new social program, Auxilio Brasil, until December. Without the need for new compensation, the tax is likely to return to its previous rates: 3% from 4.08% a year for individuals and 1.5% from 2.04% for companies.
The government also made an adjustment in legislation and removed the obligation for the Treasury to transfer funds to Brazil’s social security system to compensate for the effects of the payroll exemption, according to the statement.
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