Brazil Unveils Tax Incentive Scheme to Erase Interest Charges

Brazil's government has introduced Desenrola Parcelamentos, a program to boost tax revenue by eliminating interest charges for taxpayers who clear their renegotiated debts early. This scheme aims to help meet the zero fiscal deficit target, despite an estimated loss of 690 million reais in interest revenue.

Brazil's government is rolling out a new tax incentive scheme aimed at eliminating interest charges for taxpayers who settle their renegotiated debts early. The program, known as Desenrola Parcelamentos, is expected to boost tax revenue swiftly and contribute to the government's goal of a zero fiscal deficit, according to a document reviewed by Reuters and confirmed by two finance ministry sources.

Under Desenrola Parcelamentos, the Brazilian Federal Revenue Service estimates a loss of 690 million reais ($123.84 million) in interest revenue. However, the officials emphasized that the immediate tax payments will offset this shortfall and bolster the government's coffers. The program targets taxpayers with interest due exceeding their debt by more than 50%, offering them the chance to clear debts without incurring additional interest, either through lump sum payments or installments.

The initiative, expected to launch post-municipal elections in October or in 2025, will be managed by the Federal Revenue Service and the Treasury's prosecutors office. One Treasury official noted the plan would also reduce litigation and tax debt administration costs, further easing fiscal pressures. ($1 = 5.5717 reais)

(With inputs from agencies.)