Brazil Federal Tax Revenue Soars 26% From Year Ago (Update2)

By Andre Soliani
Feb. 26 (Bloomberg) -- Brazil's federal revenue surged 26 percent in January as faster economic growth boosted collections, allaying concern that last year's lapse of a financial transactions tax would lead to a shortfall.
The government took in 62.6 billion reais ($37.2 billion) compared with 49.9 billion reais in the same month a year earlier, the federal tax agency said in a report distributed today in Brasilia. The expired financial transactions levy produced 2.9 billion reais in January 2007.
Tax revenue is soaring as Latin America's biggest economy expands at the fastest pace in more than three years, fueling a jump consumer spending and record company profits, said Alex Agostini, chief economist at Sao Paulo-based Austin Rating Servicos Financeiros.
President Luiz Inacio Lula da Silva's congressional failed to get congress to renew the 0.38 percent tax on financial transactions before it expired in December. Opposition lawmakers said the demise of the tax would force the government to cut spending and help avoid yet another increase in the tax burden.
To make up for part of an anticipated 40 billion-reais budget gap, President Luiz Inacio Lula da Silva raised other levies expected to generate 10 billion reais in 2008.
Simpler Taxes
Brazil's business leaders view taxes as the major obstacle for companies seeking to expand, according to a survey by the national industrial association, published in October. The tax burden reached a record high 34.2 percent of gross domestic product in 2006, according to figures by the tax collection agency.
The government will send Congress a tax reform proposal on Feb. 28 that aims to cut taxes for investments and exports, Finance Minister Guido Mantega said last week. The proposal also plans to simplify the country's tax system by unifying various federal levies into one.
Mantega told reporters in Brasilia today the tax reform, once approved, could increase collection by spurring economic growth and reducing evasion. He said the reform's goal will be to reduce payroll taxes as well.