Measures do not solve fiscal problem in the long run, warns Pestana, director of IFI

The measures announced on Sunday night (8) by Finance Minister Fernando Haddad to replace much of the IOF package-as well as others that should be detailed by Tuesday by the government-should only cover the 2025 and 2026 accounts, but will be insufficient in a longer-term view, thinking about controlling public debt evolution. The evaluation is from Marcus Pestana, executive director of the Independent Fiscal Institution (IFI), a body linked to the Federal Senate.

In Pestana’s assessment, political rejection to the increase in IOF is due to poor tax quality, the fact that it is not imposed and has harmful effects on credit.

One of the measures avoided at the meeting between Haddad and Congress leaders on Sunday night is the BETS taxation. In this case, Pestana points out that the revenue of sports betting companies is around $ 300 billion. That is, if the rate goes from 12% to 18%, as a proposal, it would already generate $ 18 billion per year. “In addition, taxation can help combat a huge disorder with family indebtedness that is affecting even people’s mental health,” he added.

Another possibility announced by Haddad is the taxation of fixed income, specifically the letters of agricultural credit (LCA) and real estate (LCI), which today are exempt from income tax and which would be taxed by 5%. Pestana warns that these funds finance fundamental sectors and job generators. “You pull the blanket on one side and find out on the other. The great attraction of LCAs and LCIs is the exemptions of taxes. Liquid gain is larger than other applications. It is very likely that the charge disincentive people to invest,” he says.

According to Pestana, “Brazil is experiencing a growing strangulation of the public budget, it is the country that has the most cast budget from everyone, the symptoms of this are explosive growth of public debt, because we do not generate surplus to pay interest, so the debt is growing like snowball.”

He foresees absolute strangulation in 2027. “The discussion has not advanced to break the rigidity of our budget, which is the strictest in the world. In 2027, 100% of the budget will be mandatory, no maneuver, zero investment. It will only have for health, education and mandatory transfers,” he warns. He adds: “The future president of the Republic will have to do a deep tax reform.”

For the IFI director, the ideal would be to create solutions not only for 2025 and 2026. “Better to definitely solve the problem and not create palliative measures. This package will depend on the details for us to know how much it generates adjustment and if it has permanent measures,” he says.