Good morning! The government wants to tax all financial transactions in Brazil—a highly controversial idea. Landowners want to allow land grabbing. Suicide rates explode among Brazilian cops. And the dreadful Tuesday for Amazon’s competitors. (This newsletter is for platinum subscribers only. Become one now!)
Brazil could have new tax on financial transactions
The Economy Ministry’s tax reform plan includes a 0.4-percent tax on cash withdrawals and bank transfers. Another 0.2-percent tax would be slapped on payments made by debit or credit card—to be paid by merchants and consumers alike. To compensate for the move, the government would reduce corporate payroll taxes, but House Speaker Rodrigo Maia has already told the government this proposal will be met with resistance by Congress.
Why it matters. Taxes on financial transactions are highly controversial among economists. Advocates point out that it would help taxing informal businesses, which are currently lying outside of revenue authorities’ scope of action. However, it also incentivizes companies and firms to rely more on transactions made outside of the financial system. Another problem is its cumulative nature—if a product is manufactured in several steps, the tax will be paid multiple times.
Deterrent to business. Reforming the tax system is a...