Brazil Federal Tax Revenue Soars 26% From Year Ago

Brazil's federal revenue surged 26 percent in January as faster economic growth boosted collections, allaying concern that last year's lapse of a financial transactions tax would lead to a shortfall.

The government took in 62.6 billion reals ($37.2 billion) compared with 49.9 billion reals in the same month a year ago, the federal tax agency said in a report issued today in Brasilia. The expired financial transactions levy produced 2.9 billion reals in January 2007.

Tax revenue is soaring as Latin America's biggest economy expands at the fastest pace in more than three years, supporting a jump consumer expenses and record company profits, said Alex Agostini, chief economist at Sao Paulo-based Austin Rating Servicos Financeiros.

To make up for part of an expected 40 billion-reals budget gap, President Luiz Inacio Lula da Silva raised other levies expected to generate 10 billion reals in 2008.

Simpler Taxes

Brazil's business leaders view taxes as the major obstacle for companies seeking to expand, according to a survey by the national industrial association, published in October. The tax burden reached a record high 34.2 percent of gross domestic product in 2006, according to figures by the tax collection agency.

The government will send Congress a tax reform proposal on Feb. 28 that suggest to cut taxes for investments and exports, Finance Minister Guido Mantega said last week. The offer also plans to prune the country's tax system by consolidating various federal levies into one.

Guido Mantega said that changes in the country's tax code will spur economic growth to 5.5 percent from 5 percent.

Changes in the tax system are the most important among reforms that the country needs to pursue, Mantega told business leaders at a meeting today in Brasilia.