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According to economics experts, the next Federal Government will face many challenges from 2023. The economic scenario presents a series of complicating factors that can hinder the recovery after the crisis that has been coming since the first impacts of the pandemic. Economists interviewed by the G1 news portal indicated the balance of public accounts as a potential high-risk factor for Lula, the newly elected president. The situation is also going through a slowdown in the economy, in Brazil and in the world. With lower revenue, experts expect the next government to be forced to raise taxes to offset the increase in permanent spending approved in 2022.
Public Spending
It is unanimous among economists heard by the news outlet that the situation of public accounts is the main concern for next year. The main aspect of the matter is the fact that the budget does not include the increase in spending approved in 2022, and Lula did not clarify what he will do to find the necessary revenues.
Reduction in Tax Collection
In addition, this year’s good tax collection should not be repeated next year, due to a forecasted reduction in economic activity. According to the Federal Revenue Service, federal revenue totaled R$ 1.64 trillion in the first nine months of the year, which represents a real increase of 9.5% compared to the same period last year. This year’s results show an atypical collection of R$ 37 billion, with a collection effect on the reopening of the economy, commodity trade and the effect of inflation.
Fiscal Crisis
To end this fiscal crisis, tax solutions are necessary. One of the possibilities is that the tax reform, which was being discussed in two projects in Congress, returns to the agenda at a rate that increases the total burden, which may affect the service sector. Traditionally, it is considered that the segment pays little tax when compared to the industry, for instance.
Another path is a rearrangement of corporate income tax. Experts defending the plan are calling for an end to the total exemption from taxation of profits and dividends, along with a reduction in the IRPJ. But even some exemptions can be revised, such as the ICMS ceiling for fuels.
Economic Activity and Inflation
Inflation has been rising in the richest countries across the globe. The situation calls for an increase in interest rates abroad to help control prices – and causes economic growth to slow down. A slowdown in partner economies is harmful.
Also, in an attempt to fight inflation, Brazil went through one of the fastest increases in interest rates in its history, from the 2% per year Selic rate to the current 13.75% per year. And the expected ‘break’ in the growth of the Brazilian economy seems to have started. The Economic Activity Index (IBC-BR) of the Central Bank, known as the “preview” of GDP, registered a retraction of 1.13% in August, compared to July.