Exclusive-Brazil government to defend bill cutting tax breaks by 10%, says sources

By Lisandra Paraguassu and Ricardo Brito

BRASILIA (Reuters) -Brazil’s government is expected to back a bill proposing a 10% cut to federal tax breaks as the main alternative to a controversial increase in the tax on financial transactions (IOF) proposed last month, two sources told Reuters on Thursday.

The bill, which was proposed by lower house lawmaker Mauro Benevides, sets a 5% reduction in the value of tax benefits in 2025 and a further 5% cut in 2026, the proposal showed. The legislation also applies to fiscal and credit benefits.

The tax cut breaks, however, will not include the Manaus free trade zone and non-profit entities, the proposal showed.

Brazilian Finance Minister Fernando Haddad said earlier this week that the government would unveil a new set of fiscal measures next week aimed at balancing public accounts, with their approval seen as crucial to revisiting a controversial IOF tax hike.

The bill that government is expect to support also blocks the concessions or the renewing of tax, credit and fiscal federal benefits.

(Reporting by Lisandra Paraguassu and Ricardo Brito; Writing by Andre Romani; Editing by Brendan O’Boyle)