Brazil’s Bolsonaro extends tax breaks for labor-intensive industries

Employees work at the construction site of a residential building, amid the coronavirus disease (COVID-19) outbreak, in Sao Paulo
FILE PHOTO: Employees work at the construction site of a residential building, amid the coronavirus disease (COVID-19) outbreak, in Sao Paulo, Brazil March 30, 2020. Picture taken March 30, 2020. REUTERS/Rahel Patrasso

January 1, 2022

RIO DE JANEIRO (Reuters) – Brazilian President Jair Bolsonaro approved a bill that extends payroll tax exemptions for 17 sectors of the economy in a bid to boost job creation, according to a decision published in the official gazette late on Friday.

The exemption was extended for another two years until end-2023, and benefits meatpackers, civil construction and the textile industry, among others.

“According to this measure, companies can choose not to pay the social security contribution calculated on the payroll and continue to contribute based on their gross income. Thus, companies have a greater incentive to hire staff,” according to a note from the president’s staff.

The government now needs to find sources of tax revenue to make up for the shortfall.

Alternatives include extension of the financial transactions tax (IOF) surcharge through 2023 and keeping the so-called CSLL levy charged from banks at a high level.

(Reporting by Pedro Fonseca; Writing by Ana Mano; Editing by Marguerita Choy)