Banks praise Haddad, say government economic policy is ‘in the right direction’

The financial institutions assess that the progress of the tax framework and of the tax reform have contributed to creating an optimistic scenario, which should revive the economy; changes in income tax, however, put bankers on alert

SAN PAOLO – In the right direction. This is how the presidents of the main Brazilian private banks see the economic policy of the government of Luiz Inácio Lula da Silva (PT) until now led by Finance Minister, Fernando Haddad. Advances in the fiscal framework and tax reform have helped create an optimistic scenario that they say will unlock the economy. But there are disagreements: the banks are against the changes that the government is considering proposing in the second phase of the tax reform, which will concern income taxes.

“It is natural, from the point of view of interests, that in this second half of the year activity cools down a bit, but all the work that has been done by the Minister of Finance, by the economic team and by the Central Bank (BC) itself , goes in the absolutely right direction,” Itaú Unibanco chairman Milton Maluhy said at a press conference commenting on the bank’s second-quarter results, released on Monday.

According to him, the BC did the right thing by starting to raise interest rates in 2021, while other monetary authorities around the world were reluctant to tighten their belts. This allowed the Selic has also started to fall now – and Haddad’s work helped. “The conditions have been created by the joint work that has been done, the Ministry of Finance, the Central Bank, all looking to the long term.”

According to him, there are also capital market operations ready to go out. This is good news for banks: in the first half of the year, the revenues of investment banks fell due to the halt to issues, especially those with variable income, which pay more substantial commissions.

“What we imagine in this second half is a stronger start to activity in the capital markets, which went quite sideways in the first half,” said Maluhy, of Itaú. Weak market activity caused the bank to decline in financial advisory and fund management revenues, and led to a Reduction of service revenue growth estimate for this yearfrom the range of 7.5% to 10.5% to the range of 5% to 7%.

contrary

Banks, on the other hand, are contrary to the government’s idea of ​​extinguishing interest on principal (JCP). The mechanism allows the distribution of results by companies with deduction of the value of the basis for calculating the income tax due. Existing since 1995, the JCP replaced the monetary correction tax deduction after the Real Plan, which controlled inflation in the country.

Companies across all industries pay JCP. Banks argue that, for financial firms, the burden is great, because institutions are required to maintain capital buffers by the regulator, the BC. Therefore, the JCP would serve to compensate for tax asymmetries.

“The end of the JCP without an equation would be a wrong move, because it would tax the industry more,” said Santander’s Leão. “The JCP is not tax planning, it’s for capital that we have to withhold for regulatory reasons,” said Maluhy, of Itaú. According to the banks, the move would increase the cost of credit.

In common, however, the country’s three largest private banks said they believe in a negotiated exit with the government. “Interlocution with the government has been quite positive,” said Lazari, from Bradesco.

Source: Terra

Rose

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