Brazil targets banks in income tax hike bill

BRASILIA (Reuters) - Brazil's government submitted a bill to Congress on Friday that increases some income taxes as part of a revenue-raising effort, including a more pronounced rate hike for banks.

The bill proposes changes to the social contribution tax on corporate income (CSLL) and interest on equity payments (JCP).

Last week, Finance Minister Fernando Haddad said the two proposals would be sent to Congress to ensure compliance with budgetary rules, in case compensation measures outlined by Congress are insufficient to offset the effects of payroll tax exemptions approved by senators.

However, he had not provided details of the size of the taxes hikes.

The text proposes to increase the CSLL rate for banks to 22% until the end of 2025, returning to the current level of 20% from January 2026.

The proposal for private insurance companies, capitalization firms, and brokerages is to increase the CSLL rate to 16% until the end of 2025, reverting to the current 15% the following year.

For other companies, the rate would rise to 10% until the end of 2025, returning to the current 9% in 2026.

Regarding JCP, a form of shareholder remuneration that allows companies to deduct these payments from their corporate tax obligations, the government’s proposal suggests raising the income tax rate to 20% from the current 15%.

The government of leftist President Luiz Inacio Lula da Silva has until this Friday to submit its 2025 budget bill to Congress, detailing expenses and forecasting revenues to meet next year's fiscal target, which aims for a zero primary deficit, with a tolerance margin of 0.25% of GDP either side.

In practice, submitting the first bill that raises income taxes in specific situations provides a legal basis for including these projected revenues in the budget bill proposal.

(Reporting by Marcela Ayres; Editing by Marguerita Choy)