(Adds program terms, comments from tax agency chief)
By Alonso Soto and Luciana Otoni
BRASILIA, July 22 (Reuters) - Brazil's government will provide incentives for over 29,000 companies to use about 860 billion reais ($267 billion) worth of tax credits to settle existing tax debts, in the latest effort by President Dilma Rousseff to raise more revenues and cut a ballooning budget deficit.
Under the program, unveiled in a decree on Wednesday, companies will be allowed to use tax credits related to non-operational losses to trim part of their overdue tax bills. Firms joining the program must pay a minimum 43 percent of their debt in cash.
The plan is the latest in recent years by Receita Federal, as the tax watchdog is known, to raise money from companies fighting massive tax liabilities. The program could fetch between 5 billion reais and 15 billion reais in one-time proceeds this year, two officials familiar with the matter told Reuters.
Companies will have until Sept. 30 to join the program and settle their tax debts, Jorge Rachid, the head of the tax agency, said in a news conference. The decree has to be discussed and be passed into law by Congress within the next 180 days.
"The urgency of this initiative is justified by the fact that we do need to reduce the amount of tax liabilities," Rachid said. "We understand the time dynamics of Congress, so that is why we are moving fast with this."
Rousseff is struggling to find fresh sources of revenue to offset a sharp drop in tax collections amid a steep economic downturn. Despite her efforts, the government is expected to announce later in the day a reduction in its key fiscal surplus goal for the year.
Reducing the so-called primary surplus goal from the current 1.1 percent of gross domestic product target could complicate Rousseff's bid to retain Brazil's investment-grade credit rating. Looking ahead, economists are beginning to question the government's fiscal savings target of 2 percent of GDP next year.
Finance Minister Joaquim Levy will speak on the issue at a late afternoon news conference in Brasilia. (Reporting by Alonso Soto and Luciana Otoni; Editing by Guillermo Parra-Bernal and W Simon)