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JPM Overall Positive on Brazil Tax Reform

BRAZIL
  • Due to the long-term transition, complexity is set to remain high for some time, but they look for enhanced productivity and higher growth further down the line.
  • Reducing the concern over consumer prices, the Rapporteur exempted a number of staples from the zero rate band
  • They see the targeted timelines as plausible: have constitutional amendments approved in both houses by year-end and complimentary laws to follow next year.
  • They conclude that credit should be given to this reform, however despite some remaining open questions, this is an important step that could lead to noticeable improvements.
  • Overall, the effectiveness will depend on the implementation of the three-tier rate system in the final version: the higher the number of exemptions, the higher the final rate - and thus the lower the structural impact. They continue to believe this will be one of the most important themes for Brazil across H2.

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