Brazilian ruling party proposes wealth tax
27 June 2013
Posted by: Authors: Joe Leahy and Thalita Carrico
Authors: Joe Leahy and Thalita Carrico
In an apparent reversion to populism, Brazil’s ruling Workers Party is proposing a wealth tax on "large fortunes” to appease protesters staging the country’s largest street rallies in two decades.
The tax, versions of which have been proposed in the past in Brazil but never approved into law, is needed to finance urban transport projects and will be put before Congress for a vote, senior party cadres said.
"How will we finance the improvement in these services if we don’t do this?” said José Guimarães, the leader in Congress of the PT, as the Workers’ Party is known.
"There’s no other way. Businessmen have to help too. Why should it just be the public coffers?” he said in a statement
Any attempt to turn the street protest movement into a question of class politics will be deeply controversial in a country in which inequality has been diminishing but remains severe.
It comes as Brazil’s political parties including the PT, which before taking power in 2003 was known for mobilising mass rallies, have been caught flat-footed by the protest movement, which is largely leaderless and has risen with the help of social media.
The street protests erupted earlier this month and are continuing, albeit with less intensity, with some protesters in Belo Horizonte on Wednesday clashing with police and burning a car dealership.
The wealth tax proposal has reportedly yet to be put to President Dilma Rousseff, the PT’s candidate in office. It was unclear whether it had her support or that of former president Luiz Inácio Lula da Silva, seen as the main powerbroker in the party.
"This proposal has a Chavista element to it,” said Paulo Krammer, a political scientist with the University of Brasília, referring to the populism of the late former president of Venezuela, Hugo Chávez.
He said the PT was once known for socialism and for ethics but the former had been watered down as the party shifted to more orthodox economic policies once in power and the latter was undermined when senior party cadres were convicted last year of vote buying in Congress in the country’s largest corruption case, the Mensalão.
"It’s a party looking for new meaning, to recover its lost standing,” he said
The PT, however, said the wealth tax was needed to make Brazil’s taxation system more just.
"The central idea of the proposals is to create a Brazilian tax system that discards this regressive characteristic – those who earn less pay more – and adopts a more progressive tone, that is, those who earn more pay more,” the party said.
It was unclear how the proposed wealth tax would work or whether it would pass Congress, in which the PT has a majority through its ruling coalition.
But the plan harks back to earlier attempts to introduce such a tax, a provision for which was contained in the country’s post-dictatorship 1988 constitution.
Past attempts to pass it into law failed as another former president, Fernando Henrique Cardoso of the centre-right PSDB party and then Mr Lula da Silva, refused to support the idea when they were in office.
Ironically, Mr Cardoso himself was behind the first attempt to push through such a bill when he was still a senator in 1989, before becoming president, according to Brazil’s Institute of Applied Economic Research.