Guedes wants to reduce corporate tax from 34% to 15%

The Minister of Economy, Paulo Guedes, expressing it during a ceremony of transmitting the Post in Brasilia, January 2, 2019 – AFP

The Minister of Economy Paulo Guedes, said Wednesday, January 23 that the government wanted to reduce the income tax paid by the country's businesses of 34 % on average at 15%. To compensate for this reduction, Guedes is studying the increase in income taxes and exempt or low-tax financial investments.

In an exclusive interview with Estadão / Broadcast at the World Economic Forum, he explained that the purpose of this tax reorganization is to attract foreign investors. The minister's statements dropped the dollar by 1.13 percent to R $ 3.76, and the stock market broke the tenth record of the year.

Guedes' proposal must however face resistance from the Congress, particularly from consultants, economists, lawyers and accountants who may lose with the change. SIMPLE micro and small businesses (simplified tax collection model) can also be affected if rates do not follow the reduction.

Guedes' proposal provides for a corporate tax rate of 15%, but taxes the dividends received by the shareholders, in particular, by 20%. Dividends are paid to the shareholders of a company for the profit generated. Today, companies pay 34% of their profits and, after taxation, dividends are distributed without the collection of income tax on these gains.

As reported the State Brazil tops the list of countries with the highest corporate tax rate in 2019, surpbading France. The survey was conducted by the Organization for Economic Co-operation and Development (OECD), a group of countries with the world's most developed economies and the highest rates in the world. Brazil is not part of the organization, but is arguing for a vacancy.

"Everyone cuts taxes," said Guedes. The global wave of easing the tax burden on companies has accelerated in 2018, with the United States, Belgium and France having announced cuts.

Guedes argued that the only way to do this without overthrowing the country's income is to "reallocate". the tax burden. "If you delete one, create another and stay the same, it is practically the same tax," he said, pointing out that there would be no Tax increase. "Our essence is the substitution of the tax.There are people who do not pay, others who pay too much."

According to one of the country's leading experts in the field of Taxation, the director of the Independent Tax Institution (IFI) of the Federal Senate, Rodrigo Orair, explains the rationale of the minister in lost revenue and increased investment. "This measure encourages the company to retain more profits and distribute less to partners." According to Orair, highly profitable companies that pay a lot of dividends will lose. Those who have low profitability, low dividends, tend to win. The information comes from the newspaper O Estado de S. Paulo