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Brazil Millionaires Should Pay for Protest Demands, Party Says

June 27, 2013

Brazil Millionaires Should Pay for Protest Demands, Party Says

Metropolitan trains leave Central do Brasil multimodal station bound to the suburbs of Rio de Janeiro on June 26, 2013. In a period of just over 24 hours, the lower house approved tax cuts for urban transportation. Photographer: Dado Galdieri/Bloomberg

Brazil’s ruling party is reviving a proposal to tax millionaires’ wealth to help pay for measures demanded by protesters staging the largest demonstrations in two decades.

The move is part of a congressional rush to pass laws that placate demands from protesters for cheaper transportation, better education, and less corruption. Over the past three weeks, more than 1 million Brazilians have taken to the streets. The proposal, which has been considered for at least 25 years, came back to life as pressure for more spending coincides with a tighter budget. President Dilma Rousseff’s Workers Party, known as the PT, agreed this week to push for the approval of the bill.

“We need to offset the costs of new measures being approved in response to the protests,” Candido Vaccarezza, a Workers’ Party deputy in the lower house of Congress, said by telephone. “We’ve granted businesses tax breaks to help economic growth, now it’s time to get some of that back. The U.S. and Germany have similar taxes.” Vaccarezza said specifics of the proposal have not been decided.

In a period of just over 24 hours, the lower house approved tax cuts for urban transportation and a 2007 bill that earmarks oil royalties for education and health. As part of a marathon session that may delay Congress’s July holidays, the Senate classified corruption as a heinous crime, a bill that now moves to the lower house.

The Cost

Three bills awaiting final approval by Congress to deal with transportation, health and education issues would cost the federal government 115 billion reais ($52.8 billion) per year, Valor Economico newspaper reported today.

In an attempt to accelerate economic growth that slowed to 0.9 percent last year, the government in 2012 granted tax breaks worth 44.5 billion reais to lower costs for businesses and help stimulate consumer demand.

Brazil had 165,300 millionaires in 2012, up 26.1 percent from 2008, and their assets were worth a total $4 trillion, according to the 2013 World Wealth Report by Capgemini SA and RBC Wealth Management.

Legislators, including Senate chief Renan Calheiros, have been the target of protests over corruption, and are now eager to showcase results, said Ricardo Ribeiro, political analyst at MCM Consultores Associados, a Sao Paulo-based business consulting company.

10-Minute Vote

The Chamber of Deputies’ constitutional affairs committee yesterday approved in less than 10 minutes, with no debate or dissent, a six-year-old bill that bars secret voting when legislators are being impeached. “That’s what the power of the people does,” said Alvaro Dias, author of the bill and senator of the opposition PSDB party.

“Congress is trying to do in a few days what they haven’t done in 10 years,”Ribeiro said. “The problem is they are approving measures they’re not sure how to pay for.”

Six people have died and hundreds have been injured as protesters battled police and attacked public buildings and banks, even after authorities in dozens of cities reversed bus fare increases that sparked the wave of marches.

Large Fortunes

Previous PT attempts to tax large fortunes, as allowed by the 1988 Constitution, have been blocked in Congress. The PT’s Vaccarezza said he was unsure what support the proposal would have now.

The PT, which originally grew out of union demonstrations that helped bring down the 1964-85 dictatorship, says there is now more support to tax the rich, particularly businessmen, according to a statement on their website.

“How should we finance the improvement of these services if we don’t do it?” said Jose Guimaraes, leader of the Workers’ Party faction in the lower house of Congress, according to the party’s website. “Entrepreneurs also have to help. Why only public coffers?”

Public coffers are increasingly stretched. The country’s primary budget surplus, which excludes interest payments on debt, fell to 1.89 percent of gross domestic product in the 12 months through April from 2.46 percent in January. Finance Minister Guido Mantega said the government targets a primary surplus of 2.3 percent of gross domestic product and will cut spending to ensure the goal is met.

“It’s no use making all sorts of promises under pressure from the streets,” Lindbergh Farias, a PT senator from Rio de Janeiro said in an interview. “Promises that won’t be kept will aggravate the mood.”

To contact the reporter on this story: Raymond Colitt in Brasilia Newsroom at rcolitt@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net


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