Brazil Congress to Skip Break for Tax, Pension Bills

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Brazil Congress to Skip Break for Tax, Pension Bills

Bloomberg News

June 26, 2003

Brazil's President Luiz Inacio Lula da Silva said lawmakers agreed to skip a July recess to vote on his pension and tax bills, as company executives said proposals for tax simplification would also increase levies on business.

Lula called on lawmakers to speed up consideration and passage of the bills, which are aimed at reducing the budget deficit and ensuring Brazil can keep up payments on $400 billion of debt. He said he expects both measures to pass by September.

The tax and pension bills are need to spur economic growth and ``create the jobs that we want to create,'' Lula said in a speech at the presidential palace in Brasilia.

Lula is counting on a quick vote on both bills, as he struggles to quell resistance to parts of the plan from unions, state governors and members of his own party over. Today, businessmen led by Jorge Gerdau, chairman of steelmaker Gerdau SA, aligned with critics, saying the tax bill would increase the amount collected by the government in taxes, levies and contributions to 40 percent of gross domestic product next year from 36 percent of GDP in 2002.

``This means having to work Mondays and Tuesdays for the government -- that's ridiculous,'' said Alexandre Garcia, a TV Globo anchor who, alongside Gerdau, hosted the event in Brasilia's Hotel Nacional. More than 200 executives joined the event, called ``Tax Reform, Yes; Increase in Tax Burden, No!''

During his presidential campaign, Lula said the tax bill would only aim at simplifying a system of about 50 different levies, charges and taxes on companies. Administering the taxes, imposed at various stages of production and sale, is costly for both companies and the government.

Streamlined Collections

Lula's bills would combine separate state taxes on goods and services into a single value added tax, leaving to congress the decision where it should be charged -- at the point of sale or production.

``That's terrible, because the government will take decisions that suits best to its interests at our expense,'' Vanderlan de Souza, a director for Quirinopolis, Brazil-based Vascafe SA, a coffee processor, said.

Gerdau and other industry leaders, including National Industry Confederation President Armando Monteiro Neto, will meet Finance Minister Antonio Palocci to deliver their proposals to fine-tune the bill.

Both the senate and the lower house usually take a July recess of at least three weeks. Senate President Jose Sarney and deputy Joao Paulo Cunha, as president of the lower house, can cancel the break to speed up consideration of key congressional initiatives.