MercoPress. South Atlantic News Agency

Party is over in Brazil: increase in fuel, tax on consumer loans and imports

“The main goal of these measures is to boost confidence on the economy,” said Levy, who took office at the start of the year

Brazil on Monday announced tax increases on fuel, imports and consumer loans aimed at raising 20.6 billion Reais (7.7bn dollars) in additional revenues this year. The plan is part of an effort to help balance budget accounts and revive investor confidence, Finance Minister Joaquim Levy said at a news conference.

 “The main goal of these measures is to boost confidence on the economy,” said Levy, who took office at the start of the year. “These measures, taken together, should improve confidence, encourage people to invest in Brazil and take risks.”

The taxes will help the government collect one-third of the savings it needs to meet debt-reduction goals for the year.

Levy, who said he is working on other measures to strengthen public finances, declined to say when he will announce potential cuts to this year's budget. Levy has also pledged to curb state intervention by scaling back subsidies to certain industries.

Credit agencies have threatened to cut Brazil's sovereign debt ratings if the government fails to arrest a surge in spending and gross debt.

The government will restore a fuel tax known as Cide and a Pis/Cofins social security tax on diesel, both of which had previously been eliminated, with the former adding 0.22 Reais per liter of gasoline and the latter 0.15 Reais to each liter of diesel. The increases become effective February first.

The reinstatement of Cide could prop up the ethanol industry, which said the elimination of the tax in recent years made it less competitive at the pump.

The Finance Ministry also raised the IOF tax on personal loans to 3% from 1.5%, while increasing a Pis/Cofins social security tax on imports to 11.75%. The measures include a simplification of the tax structure for producers and wholesalers of cosmetic products.

Brazil's complex tax system is often blamed by investors as one of the main obstacles to faster economic growth.