Business sector representatives in Brazil have jointly released a manifesto calling on the National Congress to overturn a decree from the government increasing the Tax on Financial Transactions (IOF).
According to the signatories of the document, the tax increase will impose a new burden of R$ 19.5 billion ($3.82 billion) in 2025.
Signatories to the manifesto include CNC (National Confederation of Commerce), CNI (Industry), CNA (Agriculture), CNseg (Insurance), OCB (Cooperatives), CNF (Financial Institutions), and Abrasca (Public Companies).
The decree, which increases IOF on credit, foreign exchange, and insurance operations, has encountered increasing backlash from the private sector.
The signatories of the manifesto released on Monday night claim the measure will substantially increase the cost of credit for productive businesses and aggravate current economic distortions, especially concerning financial markets.
The groups mention that loans are now taxed at a rate of over 110% a year and highlight the effect on private pension plans such as the VGBL.
Economic impact and market distortions
The new slab will impact directly on imports of inputs and capital goods, discouraging investment and hindering modernisation of the national industrial park, the document said.
The organisations also emphasise that the IOF should have a regulatory, rather than a fiscal function, and denounce the tax increase as a revenue-generation measure.
They believe that increasing the tax burden affects Brazil’s business climate, which is already known for having one of the world’s highest taxation systems.
“It is necessary to ensure that the increase in revenue comes with growth, not with more taxes,” the manifesto states.
Although the government reversed some of the decree elements, such as taxes on national funds abroad and remittances for investment, it maintained the high taxes on credit, exchange operations, and international card purchases.
Congressional pushback gathers momentum
Mobilising the business sector is adding to the political pressure on House Speaker Hugo Motta, who has publicly criticised the government’s position.
Motta stressed fiscal dogmatism after Finance Minister Fernando Haddad said Congress was dragging its feet on fiscal reforms.
“Those who spend more than they earn are not victims, they are perpetrators,” Motta said, signalling a growing divide between Congress and the Executive branch on economic policy.
The manifesto implicitly counters a very clear government position by pointing out that tax rises undermine the three pillars of a strong economy.
The groups call for a “stronger” institutional framework to restore fiscal balance without raising taxes to resolve public finance woes.
Legislative action on the horizon
Political opponents are now attempting to oppose the decree through legitimate parliamentary means.
Parties such as PL, Novo, União Brasil, MDB, and Solidariedade have proposed seven legislative decrees (PDLs) to challenge the measure.
Motta is expected to meet with party leaders on Thursday, May 29, to discuss the next steps.
Meanwhile, the government is allegedly considering using a potential block on legislative amendments as leverage in negotiations with Congress.
As the argument over fiscal responsibility heats up, the IOF tax hike has emerged as a flashpoint in the larger struggle between Brazil’s executive and legislative branches, with the country’s economic environment and investment prospects at stake.
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