Government tax cuts have made it more difficult to reach the primary surplus target of 139.8 billion reais ($68.7 billion), or about 3.1 percent of gross domestic product, Finance Minister Guido Mantega said to reporters in Brasilia.
“We are experiencing weaker tax collection this year and we are implementing large tax cuts,” Mantega said. “That means we are giving up some tax income.”
President Dilma Rousseff’s administration has increased expenditures and cut taxes for companies and consumers to revive Brazil’s $2.5 trillion economy, which is forecast to grow 1.5% this year. The tax cuts total 45 billion reais this year, Mantega said. The budget surplus before interest payments in September was the smallest since July 2010 and less than half economists’ forecasts, as stimulus spending outpaced tax revenue growth.
The amount of investment that will be counted as part of the primary surplus has not been determined, Mantega said. The government is authorized to deduct as much as 42 billion reais in investments, he said. The move “does not signify weakening of public accounts,” he added. “Public debt will continue to fall.”
Brazil’s primary surplus for the first nine months of the year came to 75.8 billion reais, down from 104.6 billion a year earlier, the central bank said last month. The central government’s expenditures over the first three quarters grew 11.8 percent from a year earlier, outpacing revenue growth of 6.9 percent.