June 12, 2017 / 12:40 PM / a year ago

Brazil's Temer mulls income tax cut to win support, paper says

SAO PAULO, June 12 (Reuters) - Brazilian President Michel Temer’s administration is considering cutting the highest income tax threshold for individuals to shore up support among the middle class for his beleaguered government, O Estado de S. Paulo newspaper said on Monday.

Temer’s main political advisory group backs the idea, which would reduce the highest income tax bracket to as low as 18 percent from 27.5 percent, Estado reported, without saying how it got the information.

The plan has yet to be presented and discussed with Temer’s economic policymakers, the paper said.

The government would tax dividends in order to fund eventual revenue losses stemming from the income tax reduction, the report said. Those eligible for Brazil’s top social assistance program Bolsa Familia would get a 4.5 percent hike in stipends - above annual inflation readings.

An email seeking comment from the president’s office was not immediately answered.

The report adds to growing concerns that Temer may ease budget spending controls to assert himself in power after a recent plea deal by members of a billionaire family suggested he was involved in a corruption probe.

Based on testimony from a member of Brazil’s Batista family, prosecutors said Temer worked to obstruct justice by condoning efforts to pay for the silence of a potential witness.

Temer’s political advisors remain undecided whether the tax income proposal will be presented to Congress in an executive decree or through an allied lawmaker, Estado said. (Reporting by Guillermo Parra-Bernal; Editing by Bernadette Baum)

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