terça-feira, 20 de novembro de 2012

Brazil to raise tax on foreign currency exchange. Oh really?

It is like a game.

I wake up, check the dollar rate, then I take a look at the Industry's federation website (in fact, I'll check like a dozen news websites, in 3 or 4 languages,  but let's not talk about my obsessions...).

After that, I pretty much can say if the government is or not going to raise the tax on foreign currency exchange -IOF-  (it's like groundhog day).

Today, as it turns out, with the dollar at about 2 Brazilian Reais (not bad), FIESP website calm, inflation is not so bad, and only the Brazilian economy outlook not being so good, I thought: humm, it is tempting to try to prevent a future dollar increase through a law... Definitively the government will try something.

And you have all heard about it: Mr. Mantega, our Ministry of Treasury, has assured that Brazil will raise the IOF if the dollar even threatens to go up. This is, according to him, to protect Brazilian economy.

Well, I'm not here to convert you to the doctrine that says that controlling the exchange rate does no good (Brazil certainly should have learned that lesson. But, again, Argentina suffered even more from it and did not quit. Is it addictive?)

Now, regarding law, which indeed is my business, here is what you must now:

-Assume that the dollar exchange rate in Brazil is never determinable. IOF can, theoretically, change more than once a day. It has changed wildly, up and down, in the last 12 months;

-Add clauses to your agreements that protect you from changes in the IOF. Position the burden to pay taxes on the Brazilian party, and;

-Always set for the net values;

Don't be naive. Brazil is great for business, but you must take precautions.

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