MercoPress. South Atlantic News Agency

Bolsonaro promises to sign on Tuesday a decree suspending a tax on diesel to prevent a truckers strike

The president acknowledged the government would need to compensate for the lost revenue in another way

Brazilian President Jair Bolsonaro said on Tuesday he would suspend a tax on diesel fuel, to try and placate truckers, but the government would instead hike taxes on banks to offset lost revenue.

In a video posted to social media on Monday, Bolsonaro said the decree would suspend both the so-called PIS/Cofins tax on diesel and taxes on cooking gas for two months.

“The decrees should be published early tomorrow to zero cooking gas federal taxes and PIS/COFINS for diesel for 2 months,” he said.

The president acknowledged the government would need to compensate for the lost revenue in another way, without specifying how. “We’ll have to take it out of somewhere.”

Apparently the government is planning to raise a tax on banks’ net income to about 23% from 20% to make up for the lost revenue.

Shares in Brazilian banks fell on Monday afternoon after the newspaper O Globo first reported the shift in tax policy. The government is also planning to end some tax exemptions for vehicles and petrochemical products, the newspaper said.

Bolsonaro had promised a reduction in diesel prices by cutting federal taxes on the fuel, following threats that truckers would go on strike. That would cost 3.6 billion reais (US$ 640 million) this year.

Shares in the largest banks extended losses in late afternoon after the O Globo report. Preferred shares in Itau Unibanco Holding SA closed down 3% at 24.90 reais, and preferred Bradesco shares lost 3.3% to 22.24 reais. Units in Banco Santander Brasil fell 1.2% to 37.09 reais.