Banks have indicated that part of these tax increases will be passed on to consumers, which is also leading to concerns that lending rates in Brazil will increase, so slowing consumer borrowing.
On January 2, Guido Mantega, the finance minister, announced that the tax on banking profits, the IOF tax, would rise to 15% from 9%. In addition, a series of spending cuts were also announced as the government tries to plug a R$40 billion ($22 billion) hole in its revenues since the CPMF tax, a 0.38% tax on all financial transactions, was rejected by the senate in December 2007. As of December 31 the CPMF tax, which had accounted for 10% of government revenues, could no longer be levied.
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