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UPDATE 1-Brazil's Guedes says tax reform could finance higher welfare program in 2023

·1 min read

(Adds details from economy minister's remarks)

BRASILIA, Aug 3 (Reuters) - Brazilian Economy Minister Paulo Guedes said on Wednesday the government-backed tax reform that has not yet been voted by the Senate could finance cash handouts of 600 reais ($113.56) in 2023 under the welfare program Auxilio Brasil.

Guedes said at an event hosted by Brazilian brokerage XP Inc that budget de-indexing could make room for such expenditure under the spending cap.

The Lower House approved a tax reform in September 2021, introducing a 15% tax on corporate dividends, which are currently exempt. The bill, however, had not yet passed on the Brazilian Senate.

Reuters reported on Friday that the government wanted to conclude voting on tax reform later this year.

According to Guedes, the reform could also allow for lower income tax on individuals.

Earlier this month, Congress passed a spending package that raised the cash transfer program for low-income families to 600 reais from 400 reais for this year only. The expenditure was allowed to bypass the constitutional spending cap due to the inflationary effects of the war in Ukraine.

The minister said that the economy will grow 2.5% this year and that the expansion will be even greater in 2023.

Addressing plans for the future, he said the government wants to bring the IPI industrial tax to zero as well as labor charges to zero for companies because that could encourage more hiring.

($1 = 5.2835 reais) (Reporting by Marcela Ayres; Editing by Leslie Adler and Grant McCool)