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Brazil to suspend diesel tax; sources say bank tax to be hiked

In a video posted to social media yesterday, Bolsonaro said the decree would suspend both the so-called PIS/Cofins tax on diesel and taxes on cooking gas for two months. — Reuters pic

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BRASILIA, March 2 — Brazilian President Jair Bolsonaro said he would issue a decree today suspending a tax on diesel fuel, a move aimed at placating truckers who threatened to strike, while sources told Reuters the government would hike taxes on banks to offset lost revenue.

In a video posted to social media yesterday, Bolsonaro said the decree would suspend both the so-called 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,” he said.

The president acknowledged the government would need to compensate for the lost revenue in another way, without specifying how.

“We’ll have to take it out of somewhere.”

Two people with knowledge of the matter, who spoke on condition of anonymity, said the government planned to raise a tax on banks’ net income to about 23 per cent from 20 per cent to make up for the lost revenue.

Shares in Brazilian banks fell yesterday afternoon after the newspaper O Globo first reported the shift in tax policy. The government is also planning to end some tax exemptions for vehicles and petrochemical products, the newspaper said.

Bolsonaro had promised a reduction in diesel prices by cutting federal taxes on the fuel, following threats that truckers would go on strike. That would cost 3.6 billion reais (RM2.5 billion) this year.

Bolsonaro’s office directed questions on the possible banking tax hike to the Economy Ministry, which did not reply to a request for comment.

Shares in the largest banks extended losses in late afternoon after the O Globo report. Preferred shares in Itau Unibanco Holding SA closed down 3 per cent at 24.90 reais, and preferred Bradesco shares lost 3.3 per cent to 22.24 reais. Units in Banco Santander Brasil fell 1.2 per cent to 37.09 reais. — Reuters

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