The Brazilian government has committed with the Organization for Economic Cooperation and Development (OECD) to zero the IOF rate by 2029. Today there are four bands in Brazil of this tax that is levied on financial transactions, such as credit card and foreign exchange transactions, for example.
The staggering is something foreseen by the OECD and the reduction period is “comfortable” for the government in terms of revenue, according to the secretary, since there is the prospect of an increase in revenue. The tax waiver accumulated until 2029, according to calculations by the Federal Revenue, is R$ 7 billion.
The warning about the demand for a reduction in the IOF by the OECD was made by the permanent ambassador of Brazil to the institution in Paris, Carlos Marcio Cozendey, during an interview given to the broadcast at the end of last year.
The secretary of international economic affairs at the Ministry of Economy, Erivaldo Gomes, explained that the measure does not prevent the government from creating another type of foreign exchange or financial tax if necessary. In order to maintain alignment with the OECD and the International Monetary Fund (IMF), however, it needs to be a single tax and levied on all types of operations equally. According to Brasília, 01/25/2022 – Gomes, it only takes a presidential decree for the measure to come into force.
This Tuesday, the 25th, the OECD approved the opening of the accession process to the entity that is in Paris to six countries: Brazil, Argentina, Peru, Croatia, Bulgaria and Romania. With this, candidates will be able to officially begin the accession process, which usually takes three to four years. There is the expectation, however, that the procedures, in the domestic case, will be faster because Brazil is the most advanced among the applicants – it has adhered to 103 of 215 instruments of the organization so far.
The approval of the Foreign Exchange Law Project at the end of last year by Congress can be seen as another advance for Brazil to adapt to the international standards indicated by the OECD.
Brazil applied to join the institution that was once called the “club of the rich” in 2017, under Michel Temer. The process was stalled in recent years because of a clash between the United States and the European Union. The bloc demanded that for each new member of the globe in the organization, a country from the continent should also join the entity. Then-President Donald Trump, however, turned up his nose at such rapid growth in the OECD. Initially, Trump had a preference for Argentina, but after a more left-wing government won the election in the neighboring country, the US started to support Brazil.
Unlike other multilateral entities, the OECD is not known for financial actions such as the International Monetary Fund (IMF). The entity is a reference for international standards, mainly in the areas of economics and education.
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