BRAZIL may have to refund money after its financial transactions tax was declared unconstitutional

BRAZIL may have to refund money after its financial transactions tax was declared unconstitutional

April 01, 2001

BRAZIL may have to refund money after its financial transactions tax was declared unconstitutional.

Brazil collects a “CPMF” tax on any movement of money in the Brazilian financial system. Banks act as the collection agents. Brazil started collecting a temporary tax in 1997, and extended it in March 1999 at a 0.38% rate through March 2000 and at a 0.30% rate thereafter.

A federal appeals court said in early March that the tax was unconstitutional after March 1999 because Congress failed to extend it properly. Since the tax had already expired by the time Congress got around to extending it — two months had lapsed — the legislation should have talked about creating a new tax rather than “extending” the old one. The decision is not binding on the government, except for the taxpayer involved in the litigation.

The government is expected to appeal. If it loses, then an avalanche of lawsuits is expected from other taxpayers seeking refunds.

ARGENTINA will start collecting a new financial transactions tax on April 3. The tax will be up to 0.6% of debits and credits to bank accounts in the country and will be collected by the financial institutions.

MEXICO delayed an increase in the withholding tax charged on interest paid to foreign banks.

The rate through June 30 will remain 4.9%. However, after that, the rate will increase to 10%. The action comes after foreign banks complained to the Mexican government that they are disadvantaged compared to banks lending from the United States. The 4.9% rate for interest paid to US banks is written permanently in to the US-Mexican tax treaty. The withholding rate for interest paid to other foreign banks was scheduled to increase to 10% last January 1. This increase has been delayed for six months, the Mexican government said in March.

VIETNAM is the most corrupt country in South Asia and the Far East, according to a survey of businessmen by the Political & Economic Risk Consultancy, Ltd. in Hong Kong.

The survey ranked countries in the region on a scale of 0 to 10 — with 10 being the most corrupt — by polling expatriate businessmen working in them. The three most corrupt countries in the region were Vietnam with a ranking of 9.75, Indonesia at 9.50 and India at 9.25. Least corrupt was Singapore at 0.83.

Keith Martin