Brazil lower house passes watered-down version of bill to cut tax breaks

jueves 25 de junio de 2015 06:53 GYT

BRASILIA, June 25 (Reuters) - Brazil's lower house of Congress approved early on Thursday a diluted version of a bill that rolls back tax breaks aimed at saving the government of President Dilma Rousseff billions of dollars to rebalance its overdrawn fiscal accounts.

Lawmakers voted to partially maintain tax breaks for transportation and communication sectors to avoid further job losses as the country looks set for its worst recession in 25 years. Tax breaks for the meat and poultry industry were also maintained.

In February, President Dilma Rousseff more than doubled the social security tax rate on corporate gross revenue, effectively reducing payroll tax breaks for 56 sectors that were costing the government about 25 billion reais ($8.11 billion) a year in lost revenue.

With that original proposal the government planned to save around 5 billion reais this year as part of a plan to reach a primary budget surplus goal of 66.3 billion reais, or 1.1 percent of gross domestic product.

The primary surplus does not include interest payments. As such it is viewed as a gauge of a country's ability to service its debt.

Leonardo Picciani, the lawmaker in charge of drafting changes to the bill, said the government will collect about 3 billion reais this year if Congress approves the proposal by June 30. The senate still has to vote on the measure.

Rousseff, a leftist who has adopted more market-friendly policies in her second term to avoid losing Brazil's investment-grade rating, has struggled to pass further austerity measures due to push back from allies in Congress.

The proposal to roll back tax breaks was the last of the major saving bills to go through Congress, which had already watered down two measures to cut back on some of the world's more generous pension and unemployment benefits.

In tough negotiations with lawmakers, Finance Minister Joaquim Levy was able to avert more changes to the bill that threatened to erase all savings for the government planned for this year.

Many allied lawmakers and business leaders believe that Rousseff's newfound austerity is weighing on the already fragile economy, raising unemployment that in April reached its highest in nearly four years.

In the 12 months through April, Brazil posted a primary deficit of 42.615 billion reais or the equivalent of 0.76 percent of GDP -- the biggest gap since records began in 2001. ($1 = 3.0819 Brazilian reais) (Reporting by Alonso Soto and Stephen Eisenhammer in Rio de Janeiro Editing by W Simon)