Brazil: Tax hike hits stock prices

The Brazilian financials sector is set to suffer a hit on its profits in 2008 after the government increased banking profit taxes.

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%

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