Subsidy Cut Could Boost Social Spending

Brazil allocates 20 times the amount of the Bolsa Família program to incentives and civil servants

São Paulo

The low growth of the economy, increased poverty and the urgency to reinforce targeted social programs, has made clear the need for Brazil to review the outlay of billions of reais allocated to business incentives—now considered inefficient and inequitable.

This year, Brazil will no longer collect nearly R$310 billion ($ 56.9 billion) from tax benefits granted to companies and sectors. Added to other credit incentives (R$ 26 billion -$4.7 billion- in 2020), the amount is equivalent to almost ten times Bolsa Família, the main program focused on extreme poverty.

The total is also close to all salaries and charges for active and inactive civil servants (R$335.4 billion-$61.5 billion-), the second largest direct expenditure by the federal government, after Social Security (about R$700 billion- $128 billion).

Specialists defend that part of the money from the benefits should be directed to the reinforcement of social programs, especially those aimed at early childhood, to break the cycle of intergenerational poverty, which leads children of poor parents to become, in the future, parents of poor children.

They also say that an administrative reform that reduces the weight of civil servants in federal spending is essential, making room in the Budget for investments and targeted income programs.

Tax, financial and credit benefits to sectors and companies doubled in the Lula and Dilma Rousseff administrations (2003-2016) and today reach almost 4.5% of GDP.

Although the Jair Bolsonaro government has promised to reduce them, there has been no significant change so far.

Translated by Kiratiana Freelon

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