UPDATE 2-Brazil to make payroll tax breaks permanent -Mantega

martes 27 de mayo de 2014 18:15 GYT
 

(Adds business confidence data and context in last two graphs)

BRASILIA May 27 (Reuters) - The Brazilian government will make payroll tax breaks permanent for some sectors, Finance Minister Guido Mantega said on Tuesday, moving to extend benefits to businesses that were losing confidence in the country's economy.

President Dilma Rousseff has granted payroll tax breaks to 56 sectors that range from shoe makers to airplane manufacturers in a bid to jump start an economy that has slowed sharply in the last three years.

Although the government initially said the breaks were permanent, some officials had given conflicting comments indicating that authorities could let the benefits expire at the end of 2014 to bolster tax revenues.

The government will now draft legislation to make the tax breaks permanent for those sectors, Mantega told reporters in Brasilia, clarifying the administration's intention.

Mantega said the tax breaks will reduce tax revenue by about 21.6 billion reais ($9.6 billion) per year, but that higher activity and profitability will compensate that loss.

Still, the benefits have so far done little to support an economy that has failed to pick up pace and will likely disappoint for a fourth straight year with growth of about 1.6 percent. The Brazilian economy grew an average 4 percent per year in the previous decade.

Industry confidence in Brazil has dropped to its lowest level since the 2008-2009 global financial crisis, according to recent data from economic think tank Fundacao Getulio Vargas.

The tax breaks have also reduced revenues that the government could use to pay down debt. The country's finances have deteriorated to a point that led Standard & Poor's to downgraded Brazil's debt rating closer to the junk level in March.

($1 = 2.2372 Brazilian reais) (Reporting by Luciana Otoni; Writing by Alonso Soto; Editing by David Gregorio)