Levy Deadline Looms as Brazil Congress Delays Tax Vote Again

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Brazil’s lower house postponed voting to raise taxes on corporations, a setback for Finance Minister Joaquim Levy’s goal to push the bill through Congress this month.

The decision to boost taxes on corporate sales may come next week, Leonardo Picciani, a leader of the allied PMDB party in the lower house, said Thursday. Rather than vote Thursday as planned, lawmakers spent the session approving a motion to repudiate Venezuelan authorities after Brazilian senators were prevented from visiting political prisoners in Caracas.

“The government consolidated the votes to completely finalize the tax vote, but unfortunately the Venezuela issue was used as a reason not to vote,” said Jose Guimaraes, the government’s leader in the house. “This clearly is a loss. It’s a loss for the country.”

The lower house has postponed the decision several times after planning a vote in May. While some lawmakers are reluctant to raise taxes during an economic recession, Levy says the measure is a key part of his package to shrink the deficit and avert a sovereign-credit downgrade.

Originally designed to raise fiscal revenue by about 13 billion reais ($4.3 billion) a year, the bill also must go before the Senate before it can become law. The minister said Tuesday it was “important” to vote on the bill soon and get it approved by June 30.

Negotiate Changes

The lower house on Wednesday delayed the vote by a day as lawmakers met with government leaders to negotiate changes to the legislation. Aviation Minister Eliseu Padilha, also a member of the PMDB, said Thursday legislators would make minor alterations to the bill while preserving about 80 percent to 85 percent of the revenue boost.

Levy’s predecessor Guido Mantega in 2011 implemented the tax on sales to replace a levy on payrolls that was more costly for companies. The move was part of President Dilma Rousseff’s policy at the time to stimulate a slowing economy in her first term. Since winning re-election in October last year, her focus has turned to boosting investor confidence.

While the bill isn’t dead, it probably won’t be voted next week as legislators travel to celebrate traditional festivals in Brazil’s northeast, Joao Paulo Peixoto, a political science professor at the University of Brasilia, said.

Political analyst Jose Luciano Dias said that lower house President Eduardo Cunha, a member of the PMDB who has been critical of Rousseff’s government, has been reluctant to meet the government’s June timeframe for the tax bill. It was his call to end the session Thursday.

“The government tried to overrun Cunha and it lost,” said Dias, directing partner of consulting firm CAC Consultoria.

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