🤷 Whose tax is it anyway?

GOVERNMENT

Tax policy fiasco triggers Brasília blame game

There is a popular expression in Brazil that says “an ugly child has no parents,” meaning that no one wants to take ownership of a bad idea. That has certainly been the case with the government's ill-fated IOF tax package. Last week, officials announced an increase to the IOF financial transactions tax applied to credit, foreign exchange and insurance operations (click for details).

Markets interpreted the move in one of two ways — neither encouraging. Some saw it as a clumsy attempt to raise revenue. Others viewed it as an artificial way to hold the exchange rate down by making it harder for individuals and companies to move money out of Brazil. The incredibly adverse reaction forced a partial backtrack from the government.

Now, we begin to see a flurry of backchannel leaks as government officials scramble to assign blame for the policy fiasco.

The presidential and chief of staff’s offices drew first blood, suggesting to one newspaper (in off-the-record statements) that they hadn’t had time to properly assess the Finance Ministry’s proposed changes — or their impact. The response came swiftly, with another paper reporting that not only had the chief of staff’s office received the draft a week in advance, but its technical staff had actively participated in negotiating parts of the text.

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