Brazil FM Fernando Haddad calls for 'fairer and simpler' tax system

Brazil's new Finance Minister Fernando Haddad on Monday said he would propose a new fiscal anchor in the first half of this year as the administration of leftist President Luiz Inacio Lula da Silva, who was sworn in as the country's president a day back, works to “restore” public accounts. 
 

A former mayor of Sao Paulo, Haddad took office with the challenge of presenting a credible fiscal framework after Congress passed a package increasing Brazil's spending cap to ramp up social expenditures and meet Lula's campaign promises. In his first speech in office, Haddad said the government would not accept the “absurd” 220-billion-real ($41.19 billion) primary deficit forecast in this year's Budget, indicating it will work to reduce it.
 

He added he would work with "full emphasis" on the recovery of public accounts while fighting inflation, promising to send to Congress the proposal for a new fiscal anchor in the first half of the year seeking to ensure public debt sustainability.
 

Haddad did not mention Lula's decision the day before to extend a costly tax exemption on fuels.
 

Prior to taking office, Haddad had stated that the measure - which has an annual impact of 52.9 billion reais - would not be extended.
 

Fiscal uncertainties in Brazil, Latin America's largest economy, have delayed market bets regarding the beginning of monetary easing, which would help to ignite domestic activity in a scenario of global slowdown.
 

A lawyer with a master's degree in economics and a doctorate in philosophy, Haddad has been viewed with distrust by the market for fear of uncontrolled spending in a country that already holds high debt from its emerging peers.
 

He sought to dispel these concerns on Monday, saying the harmonization of fiscal and monetary policy would happen "for sure" and that fiscal and monetary authorities would need to reach an understanding seeking balance.
 

"We are not here for adventures," he said.
 

According to Haddad, the government will seek to democratize access to credit and establish a more transparent, "fairer and simpler" tax system.
 

Meanwhile, Brazilian markets delivered a negative initial verdict on leftist President Luiz Inacio Lula da Silva's first full day in office on Monday, after he pledged to prioritize social issues, while also ordering a budget-busting extension to a fuel tax exemption.
 

The real currency lost 1.5 per cent in value against the dollar in morning trading, while the benchmark Sao Paulo stock market index fell 3.24 per cent before midday. Shares of state-run oil company Petrobras retreated 6 per cent. Lula narrowly defeated far-right former President Jair Bolsonaro in October, swinging South America's largest nation back on a left-wing track.