MercoPress. South Atlantic News Agency

Brazil tax revenue drops 6.55% in June, another symptom of slowing economy

Will President Rousseff meet fiscal targets and stimulate the economy?

Brazil's federal tax revenues dropped more than expected in June from the same period a year before, as a stubborn economic slowdown hurts corporate profits and prompts the government to grant tax breaks to some industries.

Brazil's federal government had tax revenues of 81.107 billion Reais (39.8 billion dollars) in June, 6.55% less than in the same month in 2011 when adjusted for inflation, Brazil's tax authority said on Tuesday.

The drop in revenues may add to concerns on whether President Dilma Rousseff can meet fiscal targets while trying to stimulate the economy with a flurry of tax cuts, subsidized credit and more spending.

Brazil's economy is expected to grow less than 3% in 2012, well below the 7.5% rate seen only two years ago.

Declining corporate profits reduced tax revenues from companies in June, Brazil's tax authority said. Tax breaks on fuel and locally manufactured goods, aimed at stimulating investment and reducing inflation, also capped revenues.

In the first half of the year, the Brazilian federal government cashed in 508.555 billion Reais (249 billion), 3.66% more than in the same period a year before.

In related news Brazil's current account deficit widened in June from May, mainly because of a much smaller trade surplus.

The current account deficit was 4.4 billion dollars last month, compared with 3.5 billion in May, the central bank reported Tuesday. The current account deficit in June 2011 was also 3.5 billion.

The country's 12-month current account deficit also widened in June to 51.8 billion, dollars or 2.2% of GDP, from 50.9 billion in May. The June current account result was affected by a much smaller trade surplus, which fell to 806 million from 2.95 billion in May.

Meanwhile, Brazil's foreign-direct investment surged slightly in June, to 5.8 billion from 3.7 billion in May. Over the last 12 months, FDI reached 63.9 billion, equivalent to 2.7% of GDP.