After the postponement of President Luiz Inácio Lula da Silva’s trip to China, other names also canceled the trip to Beijing in the presidential entourage, such as the Minister of Finance, Fernando Haddad. “O debate on the new tax rule will take place during the week, with discussions led by the minister”, said the minister of the Institutional Relations Secretariat, Alexandre Padilha. He also stated that the topic will be the focus of Fazenda com Lula this week.
However, Padilha said he still there is no set date for the presentation of the new tax rule.
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Haddad announced that the proposed fiscal framework was delivered at the Planalto Palace it was delivered to Lula about 2 weeks ago. The measure will replace the Spending Ceiling and will be a ‘new way to monitor public accounts‘, according to the head of the farm.
According to the minister, the technical area of the Ministry of Finance has already answered Lula’s doubts about the text of the proposal.
For the president, the Treasury’s proposal should include sufficient elasticity in government spending to fulfill campaign promises, especially the costs of social programs. The current spending ceiling makes it impossible to expand public spending; in the financial market, there is concern about the danger of rising inflation and an eventual growth of public debt, which would destabilize the economy.
What is a tax framework?
To review government spending rules, Lula’s management proposed the fiscal framework. “This is a set of rules in the tax area that the government will send to Congress, as a Complementary Law, with the aim of replacing the law since 2016, in the Temer government, known as the Spending Ceiling”, explains Alexandre Espírito Santo, chief economist at Órama and professor at IBMEC-RJ.
The measure is part from the promise booklet by Lula-Alckmin, who cited as a priority “revoking the spending ceiling and reviewing the current Brazilian fiscal regime, which is currently dysfunctional and without credibility”.
What is the effect of the framework on the economy?
“The expectation is that the rule can help control inflationary expectations, allowing the Copom, from the Central Bank, to reduce the Selic interest rate, which is very high, hindering the growth of the economy”, defends Espírito Santo.
Proposed fiscal framework should replace spending ceiling:
- One of the most ‘beaten’ points in Lula’s campaign, the fiscal rule has been generating expectations, being one of the main measures of the president’s economic agenda. Since November, Fernando Haddad already promised the proposaleven while the Transition PEC was unfolding;
- Like Haddad, Simone Tebet also believes in the power of the new project. She even claimed that the proposal will please everyone, “including the market”;
- According to the government, “getting it right” in the new fiscal framework will generate impact on the economy more relevant than discussions about the inflation target.
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