September 15, 2014 / 10:13 PM / in 5 years

Brazil extends tax breaks for manufacturers ahead of election

BRASILIA, Sept 15 (Reuters) - Brazilian President Dilma Rousseff’s leftist government, agreeing to industry lobby group demands less than a month before a contested election, announced tax benefits on Monday for manufacturing companies operating abroad or exporting goods.

Finance Minister Guido Mantega said a 9 percent tax break enjoyed by Brazilian food and beverage, construction and services companies operating abroad will be extended to all manufacturing firms that work outside the country.

Mantega also announced that all manufacturing companies that export goods will get a special tax refund in 2015 equal to 3 percent of the value of their exports. He said the commodities sector is doing very well and did not need the tax break.

Mantega said payroll tax breaks and subsidies for industry will be maintained next year, and he vowed that the government will push through a reform of Brazil’s complex and onerous tax system, a major complaint from the business sector.

If she is re-elected in October, Rousseff will be replacing Mantega, Latin America’s longest serving finance minister who has told her he will leave the government for personal reasons and not serve in her second term starting on Jan. 1.

Mantega has lost credibility in the market due to his overly rosy forecasts of growth in an economy that has ground to a halt under Rousseff and entered a recession this year.

Brazil’s business community blames her excessive intervention in the economy for the slump and hopes to see her defeated next month in an election in which Marina Silva, an environmentalist who has adopted market-friendly policies, is seen winning a second-round runoff by a small margin.

Mantega said the Brazil’s high interest rates, another complaint from businesses, were only temporary and said monetary policy will become more flexible when inflation recedes.

He also promised reforms to reduce the large number of legal disputes over taxes companies have to pay the government. (Reporting by Anthony Boadle; Editing by Ken Wills)

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