Brazil will seek to simplify its tax code in 2017, President Michel Temer said on Thursday, aiming to expand reforms following earlier proposals to modify the pension system and labor laws. Since taking office after the ouster of his leftist predecessor Dilma Rousseff, Temer has pledged to pursue structural reforms in order to lift Brazil from its deepest economic recession in decades.
This month, Congress sanctioned his proposal to limit growth of public spending for the next 20 years, clearing the way for votes on other measures. The pension system must be overhauled if the spending cap is to have real effect. In a news conference in Brasília, Temer said he expects Congress to swiftly approve his plans to ease the hiring of workers on temporary contracts, saying lawmakers have shown “strong support” to his agenda.
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“Why not pursue tax reform now that plenty of bills have advanced?” Temer said. Economists have long criticized Brazil’s complex tax system as a barrier to long-term growth. Companies in Brazil spend on average 2,038 hours to do their taxes or about 12 times the average in the wealthy OECD group of nations, according to the World Bank’s “Doing Business” index. Temer’s advisers have floated a proposal to unify the federal PIS and Cofins taxes. The government could also negotiate with states to unify an inter-state tax known as ICMS, a measure considered crucial to reduce legal uncertainties.
On Thursday, Temer also promised to support any Congressional efforts to reform Brazil’s political framework, a messy multiparty system that critics say makes Brazil’s electoral politics complicated and often corrupt. “The theme of political reform belongs to Congress, but we’ll incentivize it and support it,” he said. Some lawmakers have called for rules limiting the proliferation of parties, blamed for fostering corruption by demanding broad coalition and deal-making in Congress. There are currently 35 parties registered in Brazil’s electoral court, with 26 represented in the country’s lower house of Congress.