Turim’s Insights

The new proposal of Tributary Reform was one of the themes that most affected markets this month, with an impact mainly on the Brazilian stock market and, therefore, was one of the subjects addressed at our monthly webinar.

In the conversation, our economist Henrique Santos, explained that consumption taxation in Brazil is very complex, with municipal, state and federal taxes often overlapping each other. Therefore, a reform capable of simplifying this taxation would have a positive impact on the country’s potential growth.

However, Henrique emphasizes that the proposal presented by the government brings more timid changes in taxation on consumption, unifying only federal taxes, in addition to mixing in with the discussion a redistribution of the tax burden between Individuals and Legal Entities.

“If the initial objective was a structural reform with a positive impact on potential growth, the current proposal does not achieve that. What it does is redistribute the tax burden, compensating an exemption for Individuals, taxing dividends and generating a relevant net increase in charges for Legal Entities”, explains Santos.

In short, our economist considered that the text of the tax reform does not encourage investments and, therefore, does not bring benefits from a structural point of view. In addition, he adds that the bill may still be heavily defaced, and it is not even possible to rule out that it will not be approved by Congress this year.

Besides him, Gustavo Marini, founder and co-CEO; Fernando Verboonen, Portfolio Manager; and Rodrigo Louro, responsible for Turim UK and head of Research.