April 25, 2024 18:27 GMT
Challenge To Approve Tax Reform Proposal This Year
BRAZIL
- Lawmakers will start to debate the new VAT regulation by May, with the hope of approving it by year-end. To achieve that, lower house Speaker Lira said that he will work to see it approved in the house until July’s mid-year recess. Further details were revealed today, including news that the tax reform rules will be reviewed every five years. The new VAT will not apply to churches, health and education providers and will not be charged on companies’ financial income.
- JP Morgan remains sceptical on the approval of all aspects of this proposal by the end of this year, given that lawmakers attention will shift from this to municipal elections as we enter 2H24. Other subjects such as the 2025 budget will also demand attention. Nonetheless, JPM note that there is no going back and remain of the view that the framework will be settled in time to start the VAT transition by 2026.
- Brazilian local assets were impacted by US developments today, with the rise in core yields helping to lift DI swap rates by c.9bp in the belly of the curve and BRL initially coming under pressure from the spike in the dollar, before gradually recovering as the greenback edged lower over the course of the US session.
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