The future Minister of Finance, Fernando Haddad (PT), said this Tuesday (13) that he will reassess the situation of public revenues as soon as he takes office and did not rule out an increase in the country’s tax burden, which can be done through subsidy cut. He also stated that only in January, when he takes office, will he be able to say when the government will once again reach a surplus.
Doubts about the management of public accounts in the next government have strained the financial market, since an eventual lack of control of the public debt could increase the risk perception in relation to Brazil, raise interest rates and reduce investments.
In his first press conference after being announced as minister, Haddad was asked whether the country should expect an increase in cargo next year. When answering, he cited studies to be done on the scenario of public accounts, in particular on the level of revenues in 2023 – which, for him, are underestimated.
“The first step I’m going to take at the beginning of the year is to reestimate revenue. In my opinion, it’s underestimated,” said Haddad. “If perhaps the preliminary diagnosis we made is correct, we are going to think, from the recalculation of the estimate, on the measures that we are going to take for next year”, he added.
Still on government revenues, Haddad gave indications of which paths the government will adopt. He again cited the issue of tax exemptions (which reduce public revenue), and specifically mentioned the Manaus Free Trade Zone – one of the main expenditures under this heading. He also said that companies will have to “wean” from the government.
The Federal Revenue estimates that, for 2023, subsidies and exemptions in the tax system will exceed R$ 450 billion. The biggest expenses will be granted to Simples Nacional (R$ 88.5 billion), to the industries of the Free Zone of Manaus (R$ 55.3 billion) and to agribusiness (R$ 53.9 billion).
Also on the list are non-taxable income from the Individual Income Tax (R$ 45.3 billion), as well as subsidies to the automotive sector (R$ 10 billion) and vessels and aircraft (R$ 5.8 billion).
The exit via revision of subsidies increases the tax burden, but has been indicated by different analysts as valid in view of the strong demand for resources on different fronts and in view of the distortions it causes. Former Finance Minister Henrique Meirelles, for example, is one of those who defend this path.
Discussions on the situation of public finances intensified after the elected government articulated the submission to Congress of a PEC (proposed amendment to the Constitution) to significantly increase expenditures from next year, at the same time that it committed itself in the text drawing a new rule to replace the spending cap.
An increase in expenses of the magnitude intended by the PT in the PEC (extra expenses that exceed R$ 150 billion), without compensation with increased revenues or cuts in other expenses, would have the consequence of increasing the account deficit in 2023. The Budget projects officially a BRL 63.5 billion shortfall, but the current government has updated this estimate to a lower figure, although still negative at BRL 40.4 billion.
The existence of public deficits indicates that the government is financing expenditures by issuing a larger volume of Brazilian debt. The cost is close to the economy’s basic interest rate, the Selic, currently at 13.75% per year.
Haddad said that he had no participation in the formulation of the PEC – but he was involved in conversations about it, mainly with the economists who were part of the government transition (Persio Arida, André Lara Resende, Nelson Barbosa and Guilherme Mello).
Even so, he defended the proposal saying that the level of spending next year needs to be at least the same as the previous year (in relation to GDP), and said that the idea provided by the PEC is to maintain precisely this level.
“The economic transition team made an account: what is the 2023 Budget so that Lula has the same amount in the first year of government that Bolsonaro had in the last one as an expense as a proportion of GDP? It is a very simple concept to understand”, he said. Haddad.
“President Bolsonaro authorized a series of expenses in the middle of the year, depending on the electoral calendar. See that with all this, the government will not be able to close 2022 without the approval of the PEC.” This value, said the future minister, would be around R$ 150 billion.
According to him, the country needs to reconcile fiscal responsibility with responsibility for public quotas. “The people have to be in the Budget because they are the ones who pay taxes,” he said.
Haddad also stated that he does not know this market that the media talks about, saying that he is announcing for his team names appreciated by the private sector.
He also said that the world has changed since the first term of Luiz Inácio Lula da Silva (PT) and that the economic agenda today is different.
The future minister stated that technological development offers new options to stimulate competition in the banking sector, access to credit and lower interest rates.
“The world has changed a lot since 2003, especially with regard to technology. You have players that did not exist, there is regulation thriving all over the world that did not exist. There are strong banks that practically do not have branches,” said Haddad.
“There is a platform that you can work on to ensure more competition, using technological instruments that were not available. You had TED, then Pix, tomorrow you can have Pix in installments, a credit system for Pix, you can have a lot of thing going on. There may be a profusion today of agents that will help to democratize credit, make the final interest rate fall”, he said.
Haddad said that, even under this new agenda, traditional banks, in addition to those that are public, remain relevant. “Take agricultural credit, what percentage of that is in Banco do Brasil? It is very large, Brazil has knowledge about agricultural production that no other country has”, said the future finance minister.
He also said that Caixa Econômica Federal played a “fundamental” role in managing social programs.
“But in relation to the democratization of credit, I believe that we will be able to count on a new world that helps us to guarantee competition, a drop in the spread, a drop in the interest rate of the final borrower”, said Haddad. According to him, Lula is the one who will define the name of the presidents of state banks.
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