Credit will be more expensive with higher taxes, says Febraban

The increase in taxation on banks and financial institutions announced this Thursday (28) by the Bolsonaro government should increase the cost of credit in a scenario in which the BC (Central Bank) has already promoted a strong increase in interest rates to combat inflation.

The measure was heavily criticized by industry associations.

“The government is wrong to increase, once again, the CSLL (Social Contribution on Net Income) rate for banks, encumbering consumers, families and companies with more expensive credit”, said Isaac Sidney, president of Febraban (Federação Brasileira of Banks), in a note.

According to him, the incidence of more taxes puts pressure on the cost of money in the country, particularly at a time when society is facing the hike in the basic interest rate to contain the escalation of inflation.

The basic interest rate, the Selic, rose from 2% in March 2021 to the current level of 11.75%, with market agents expecting it to reach 13.25%.

President Jair Bolsonaro (PL) edited this Thursday an MP (provisional measure) that raises taxation on banks and financial institutions to fund the opening of the debt renegotiation program of Simples Nacional companies.

as showed the Sheet, the CSLL (Social Contribution on Net Income) of banks will rise from 20% to 21% by the end of this year. The rate of other financial institutions will increase from 15% to 16%.

The measure was published in an extra edition of the Official Gazette and, even before publication, was already being criticized by banks for increasing the tax burden on these institutions at a time of rising interest rates and increasing credit.

“The search for a narrative against banks, on the assumption that raising taxes in the sector would yield political dividends, hits the citizen and the economy once again, making important lines in the economic recovery process more expensive, such as real estate and vehicle financing, credit payroll and working capital”, said the president of Febraban.

Sidney assesses that the measure shows insensitivity towards people and companies, particularly micro and small ones, which are the ones that most need credit in a scenario of low economic growth.

“It makes no sense to increase the tax burden at a time when the economy is slowing down and when Selic and inflation are high.”

President of Acrefi (National Association of Credit, Financing and Investment Institutions), Luis Eduardo da Costa Carvalho says that the measure “is totally unreasonable”, since it will increase the cost of credit at a time of high interest rates.

“At a time when the world is going through a major crisis, due to the Covid-19 pandemic, it is important to make it clear that the rise in taxes can impact inflation”, said the president of Acrefi.

Impact for customers and shareholders

According to João Frota Sales, financial sector analyst at Senso Investimentos, the measure harms both bank customers and shareholders.

“Everything ends in interest for the consumer. And for the shareholder it is not good either, since more taxes dampen the coming results”, says the expert.

Salles adds that, with the measure, the trend is for an even greater deceleration in the demand for credit.

First of the big banks to release the results of the first quarter, the figures from Santander showed a drop in the loan portfolio compared to the end of last year, with an increase in default rates.

The shares of the bank and its peers in the sector had a session of strong losses on the day of the release of the balance sheet, with a worsening in the market’s perception about the next balance sheets to come.

This Friday (29), however, in a session of lower risk aversion on a global scale, the shares of large banks operate on the rise.

At around 12:20 pm, Santander’s shares were up 2.6%, while Bradesco’s shares advanced 1.5%, and Itaú’s, 1.1%. BB (Banco do Brasil) shares rose around 1%.

“In 2021, the Brazilian banking sector contributed to the government and the country when the CSLL rate was increased by 5 percentage points. The measure was announced as temporary and restricted to last year. With surprise and perplexity, we see the banking sector , which already pays a rate of 20% of this contribution against the 9% paid by all other sectors, will once again be penalized, harming the development of the entire economy”, said Sidney, from Febraban.