Brazil to cut electricity taxes to boost economy

President Dilma Rousseff plans to cut and simplify taxes for electricity producers and distributors, two senior officials told Reuters, as part of a strategy to reduce Brazil's high business costs and stimulate its struggling economy.

But the officials, who spoke on condition of anonymity, said the tax reductions for electricity companies would likely be the most far-reaching to date.

They said Rousseff will announce the plans in coming weeks. Brazil has the world's third-highest power costs so Rousseff is aiming to give relief to consumers as well as companies in energy-intensive areas such as steel and petrochemicals.

Rousseff probably will not pass the tax cuts by decree, so she will have to negotiate them with Congress and other groups.

She plans to use her record-high popularity ratings to push through cuts to taxes at both the federal and state level, with a special focus on eliminating levies that overlap or are difficult to calculate, the officials said.

Brazil's tax code is so complex that an average company spends 2,600 hours a year calculating what it owes, according to the World Bank's annual Doing Business study, which compares business practices around the world. That is almost 14 times the time needed to do taxes in the United States, and by far the highest among the 183 countries in the bank's survey.

"The focus is as much on simplifying taxes as reducing them," a second official said.

Brazil's electricity industry includes state-run companies such as Eletrobras (LIPR3.SA) as well as multinationals like AES Corp. (AES.N) and GDF Suez (GSZ.PA). Hydroelectric power supplies about three-quarters of Brazil's electricity needs, with nuclear, thermal and wind power accounting for the rest.

sources:
Reuters