Brazil is planning to suspend tax on diesel fuel, announced by President Jair Bolsonaro as a move to placate trucker’s threats of a strike. However, Reuters sources said that the government plans to hike taxes on banks to offset lost revenue, raising the tax on banks’ net income to about 23% from 20%. President Bolsonaro had promised to reduce diesel prices via a cut in federal taxes, following threats that truckers would go on strike, which would cost $640mn this year.
The proposed move would suspend both PIS/Cofins tax on diesel and taxes on cooking gas for two months. “The decrees should be published early tomorrow to zero cooking gas federal taxes and PIS/COFINS for diesel for 2 months,” Bolsanaro said. The government plans to also lift tax exemptions for vehicles and petrochemical products. Shares in Brazilian banks fell with the announcement of the reported shift in tax policy. Brazilian bank bonds were not spared either with Banco Do Brasil’s 6.25% perp down 1.75% to 98.275, now offering a yield to call (Aril 15, 2024) of 6.87%.
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