FRANKFURT, March 16 Brazil's government will
appeal a court decision that is expected to reduce revenue from
social security levies, Finance Minister Henrique Meirelles said
on Thursday, adding that the impact from the ruling is likely to
be much smaller than local media reported.
The Federal Supreme Court ruled 7-4 on Wednesday that the
inclusion of the ICMS value-added tax in the base of calculation
for so-called PIS and Cofins social security contributions was
unconstitutional. The decision is seen as triggering large
revenue losses for the government and accelerating moves to
Local media have reported that the cost of the ruling could
reach 100 billion reais ($32 billion) for the past five years
and 250 billion reais if recognized retroactively since 2003,
when a legal dispute surrounding the issue began.
Potential losses would probably be much lower than that
since "the number of lawsuits is relatively low," Meirelles told
reporters on the sidelines of a conference in Frankfurt. "We
don't have a precise estimate, but we can say the numbers will
be much lower."
In the ruling, justices said the ICMS did not represent a
share of corporate revenues and therefore could not be levied to
finance social security. The PIS and Cofins taxes are charged to
almost all goods and services sold in Brazil, including food and
Lawyers have said the decision, which ends a 14-year dispute
between the government and several companies, could lead to
declining prices for some products but also squeeze federal tax
collections amid a record budget deficit.
The government is considering raising the CIDE fuel levy and
the IOF financial transactions tax to increase revenue, two
people briefed on the matter told Reuters. An announcement is
expected on Wednesday.
($1 = 3.0951 reais)
(Reporting by Arno Schuetze; Editing by Guillermo Parra-Bernal
and Lisa Von Ahn)