The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

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% 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.

The stock market plunged on the back of the tax increase as brokerages and funds reduced their Brazilian bank exposure to reflect expected profit declines.

The consumer market is also set to suffer. "The bottom line is that this tax increase will mean that banks will lend less because loans will cost more, and so fewer consumers will be able to afford them," says Ricardo Amorim, executive director for emerging markets at WestLB.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree