Minister of Finance rejects the approval of the tax reform until the end of the year

Finance Minister Eduardo Guardia rejected the adoption of a "broad" tax reform in the final months of President Michel Temer (MDB) presidential term. When attending an event in the capital, the head of the Treasury reiterated the view that the reform of the pension system should be given priority on the agenda – because "can not discuss tax reform with increasing spending." It has also maintained the need to correct identified imbalances, for example in PIS / Cofins and ICMS, until the country has a tax that combines different taxes: Value Added Tax (VAT).

"I do not see the slightest possibility of adopting a broad tax reform this year," Guardia said during a prize-giving ceremony sponsored by the Valor Econômico newspaper.

In an interview at the event, caused by the failure of the Temer government to solve the budget deficit, the minister said that government expenditure has grown in an unsustainable trajectory, with the most important reason being the increase in welfare expenditure and subsidies; the budgetary adjustment is more difficult to depend on structural reforms, which are difficult to process in Congress.

"What it comes down to is that we have never experienced a recession with this gravitational force, but we have switched over from a surplus of 3% to a primary deficit of 2% in recent years, a turnaround, a fiscal deterioration of 5%. percentage points of GDP, "he said.

The Minister pointed out that the situation was caused by a lack of control characterized by the exaggerated growth of public expenditure, coupled with the loss of tax revenues in recent years, partly due to tax benefits that he considered "tolerant".

Guardia also criticized the application of regulations that are considered inefficient for different production sectors. For example, it criticized the employment requirements of minimum levels of equipment and services that represented national content in the oil and gas industry, the application of implicit and unsustainable subsidies in the electricity sector and the replacement of sources of capital market funds with an action taken by the BNDES as wrong.

"So we do not go into recession because of an unfavorable external scenario, but because of insufficient state intervention and swelling in the public sector," said the minister.

"The way out of this recession is related to the complexity of the nature and the factors that have disrupted the economy," he added, adding that solving these problems requires structural reforms.

The privatization of state-owned enterprises, the Minister noted, could be an outlet for lowering the national debt, but it does not solve the budget crisis, which stems from the imbalance of government revenues and expenditures. "It makes no sense to sell assets and pay debts if you are still not in balance"

According to the Minister, reforming Welfare is an urgent and necessary condition for the sustainability of the tax system that has imposed a ceiling on government spending. But in addition to changing the pension rules, the solution of the fiscal crisis, as he said, relates to the review of each structure of expenditures, allowances and tax benefits.

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