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BRASILIA (Reuters) - The speaker of Brazil's lower house of Congress said on Tuesday he had scrapped a bill that would have forced the government to give cash-strapped states a bigger share of the billions of dollars it collects from wealthy Brazilians to legalize undeclared assets held abroad.
The government had opposed sharing more revenue from the so-called amnesty programme, which is key for President Michel Temer's government to meet its budget deficit target for this year. The bill was aimed at easing the fiscal strains of states and municipalities struggling to pay public employees and provide services.
The governor of the northeastern state of Piaui, Wellington Dias, said states were considering suing the federal government to get a bigger share of the proceeds from the programme.
"It is up to each state to decide if they go to court to get their share," Dias said after a meeting with finance ministry officials in Brasilia. "I hope the government can decide on this and give states and municipalities what is rightfully theirs."
States receive about half of the tax revenues generated by the amnesty programme but none from the fines collected by the central government. The program slaps a 15 percent tax on the total amount of assets held abroad, along with a fine equal to 15 percent of the assets.
Finance Minister Henrique Meirelles said earlier on Tuesday that the government would increase the share of states and municipalities, but only on amounts exceeding the 50 billion reais (£13.08 billion) in proceeds it expects to collect from the programme.
The programme was introduced late last year and is due to expire at the end of this month.
House Speaker Rodrigo Maia was the leading supporter of changes that would have extended the deadline of the programme, altered the period used as the basis to levy fines and increased revenue sharing with states. He said he removed the bill from the house's official agenda given the resistance from the opposition, which had threatened to block a vote earlier on Tuesday.
"There is no turning back on this matter," Maia told reporters. "The current rules remain in place. The government will not lose anything."
Other countries from Mexico to Argentina have launched similar programs to raise revenue to help make up for a drop in commodity prices that has hurt exports and tax revenue.
Reporting by Maria Carolina Marcello; Writing by Alonso Soto; Editing by Meredith Mazzilli and Tom Brown