MNI EXCLUSIVE: Brazil To Try Again With Transaction Tax

     BRASILIA(MNI) - The Brazilian government will persist with plans for a

$37-billion-a-year financial transaction tax despite claims by President Jair

Bolsonaro that he opposes it, officials told MNI, but congressmen warned that

any attempt to make the levy law could face tough opposition in Congress.

     Bolsonaro fired federal revenue service head Marcos Cintra earlier this

week and tweeted that he would rule out any return to a levy on banking

transactions similar to a deeply unpopular tax abolished in 2007. Cintra had

been in favour, Bolsonaro tweeted.

     But, despite his public pronouncements, the president has ordered Economy

Minister Paulo Guedes to continue to move towards introducing the measure, so

long as the overall tax burden is not increased, economy ministry officials

said. Some tax breaks for large companies may go, amid other measures to claw

back revenue, the officials said.

     Any such proposal could face a rough ride in Congress. Nine out of 11

parliamentary party leaders spoken to by MNI this week said they would oppose

it. The 11 speak for 302 out of 513 lower house deputies and 24 out of 81

senators. One of them, Waldir Soares de Oliveira, lower house leader of

Bolsonaro's own PSL party, declined to comment, while another, Paulo Pimenta,

house leader of the opposition PT party, said it would only take a position once

the proposal is presented.

     Until Cintra's dismissal, the government had been working on a plan to

charge a 0.4% tax on cash withdrawals and deposits and 0.2% on card payments.

When the previous transaction tax was removed in 2007, the left-wing government

of President Luiz Inacio Lula da Silva tried to extend it, but was defeated in

the House of Representatives.

     When campaigning for election last year, Bolsonaro promised not to create

any new taxes, but was persuaded by Guedes to alter his position.

     Olimpio Gomes, PSL leader in the Senate, was scathing about any move to a

levy on transactions: "The tax being discussed has alligator teeth, alligator

skin, an alligator mouth, but they say it's not alligator. No one accepts this

lie. "

     New taxes are unacceptable, said Carlos Sampaio, house leader of the

Brazilian Social Democracy Party, while Elmar Nascimento, a deputy from the

centre-right Democrats, said a financial transaction tax would

disproportionately hit the poor.

     The likely congressional resistance means that the government is likely to

wait before attempting to present the tax. Congress is meanwhile debating two

competing reform proposals for simplifying the taxation system, while the

government has yet to present its own reform.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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