Brazilian Finance Minister Henriques Meirelles on Tuesday night said the administration will ask Congress to raise the government’s 2017 and 2018 deficit ceiling. The administration of President Michel Temer will also seek new tax revenues and it will cut expenditures, especially in the area of federal payroll. Many of the measures, including the hike in the deficit ceiling, require congressional approval. The decisions were a frank admission that previous tax hikes and austerity measures have been insufficient to stem the tide of red ink affecting government accounts. Meirelles will seek a new deficit ceiling of R$159 billion for 2017 and again in 2018. The previous ceilings were R$139 billion for 2017 and R$129 billion for 2018. The government will seek additional savings of R$14 billion in 2018 from tax hikes and austerity measures. These include a proposed new tax on closed investment funds and a suspension of payroll tax deductions for selected industries. The government will postpone 2018 salary hikes for most government employees and it will eliminate 60,000 government jobs through attrition. Government employees will face a hike in their share of payroll taxes to 14% from the current 11%. The latest measures were announced despite some degree of congressional opposition. Press reports indicated the administration may now have difficulty in obtaining congressional approval for broader reforms in areas such as taxation and pensions.
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