Brazil reduces payroll tax breaks to cut swelling budget gap
BRASILIA Feb 27 (Reuters) - The Brazilian government is reducing some of the payroll tax breaks it awarded companies in the past four years, the government's Official Gazette said on Friday, in a move aimed at reversing the country's widening budget gap.
President Dilma Rousseff issued a decree that will increase social security levies that companies pay on their gross revenues.
The decision, published in the gazette, amounted to a reduction in corporate payroll taxes, was first approved in 2011 during Rousseff's first four-year term in office.
Companies that paid 1 percent of social security contribution on their gross revenue will now have to pay a 2.5 percent levy. The rate for companies that previously paid 2 percent on the social security contributions was now increased to 4.5 percent.
Finance Minister Joaquim Levy, a fiscal conservative who took office in January, has raised taxes and limit spending to meet the country's key fiscal savings goal. Those targets are key to regain the confidence of investors worried with Brazil's finances that have deteriorated since 2012.
Rousseff awarded the payroll tax breaks to dozens of industries as part of efforts to jumpstart Brazil's economy that is now entering its fourth year of slowdown.
Last year alone the payroll tax breaks cost the government 21.6 billion reais in tax revenue, according to finance ministry data.
In December, the country's public sector posted a 60.1 billion reais budget deficit, but the government's austerity drive helped revert that result to a 3.04 billion reais surplus in January, according to central bank data released on Friday.
For a text of the presidential decree, go to:
here (Reporting by Alonso Soto Editing by W Simon)
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