Deputy Criticizes Taxation of Letters of Credit

Taxation of Letters Real Estate Credit Notes (LCIs) and Agribusiness Credit Letters (LCAs) are topics that generate intense debates in the current economic scenario.

In this article, we will address the criticisms raised by deputies regarding the proposal to tax these letters, highlighting the possible negative impacts on agribusiness and civil construction.

The effects of this measure on the cost of credit, the importance of LCAs for financing agriculture and the implications that taxation may have for the middle class and the poorest will be analyzed, in addition to the discussion on the constitutionality of such tax proposals.

Overview of Criticism of LCIs and LCAs

The proposal to tax LCIs It is LCAs has been the target of strong criticism from deputies, who warn of the possible inflationary risks associated with this measure.

By imposing taxes on these financial instruments, there is a inflationary potential which can negatively affect fundamental sectors, such as agribusiness and the civil construction.

As highlighted by the deputy, these sectors depend heavily on LCIs It is LCAs for financing.

This taxation could result in higher borrowing costs, further damaging the economy in times of recovery. It is important to note that the intention of generating more revenue through higher taxes could have an unfair impact, especially on middle class and in the poorest layers, which would be most affected by the increase in financial costs as discussed.

Importance of LCAs for Agribusiness Financing

The deputy highlighted the crucial importance of LCAs for financing agribusiness, emphasizing that around 40% of the Safra Plan depends on these letters of credit.

This strong dependence indicates how much agribusiness and the Brazilian rural economy are intertwined with this specific type of financing.

LCAs not only secure vital resources for the maintenance and expansion of the sector, but are also seen as a catalyst for agricultural innovation and sustainability.

In his words,

“LCAs are the oxygen of the field”

, thus summarizing its essential role.

Furthermore, the potential impacts of changes in the taxation of LCAs are worrying several agents in the sector, as the increase in credit costs threatens to reduce available capital, affecting the entire production chain.

The deputy severely criticized this proposal, indicating that it could scare away investors and increase production costs, harming not only producers, but also end consumers.

A recent study reinforces this concern by showing this distribution:

This reality highlights the inherent risk of any legislative changes in this field, reinforcing the need for strategic actions aimed at strengthening and stabilizing rural credit.

Impact of Taxation on the Cost of Credit and Consumers

The recent proposal to tax Real Estate Credit Letters (LCIs) and Agribusiness Credit Letters (LCAs) is generating significant concerns regarding the impact on the cost of credit and on consumers in general.

According to deputy Domingos Sávio, this measure can generate inflation and negatively affect essential sectors, such as construction and agribusiness.

This is because LCAs are crucial for agricultural financing, and approximately 40% of the Safra Plan depends on these resources.

By increasing taxation, the cost of raising funds will rise, resulting in higher interest rates for loans, as highlighted by the deputy: “Taxation will become a burden on credit, raising interest rates and hurting consumers“.

The consequences of these changes will be felt on several fronts.

According to [CNN Brasil](https://www.cnnbrasil.com.br/economia/macroeconomia/taxar-lca-e-lci-e-um-erro-fatal-e-pode-gerar-inflacao-diz-deputado-a-cnn/, “Taxation raises costs in crucial sectors”), people may face greater difficulties in financing their own home or obtaining affordable credit, while the impact may be even more pronounced for the middle class and the poorest.

This measure may lead to destructuring of agricultural financing, which would threaten the entire production chain, causing an increase in the price of food and other essential products for the population.

It is essential to highlight the main impacts of this proposal:

• Higher interest rates
• Investor flight
• Limitation on access to credit

The search for fiscal solutions should not overburden crucial sectors of the economy without considering their wider consequences.

Instead, it is suggested to prioritize reduction of public spending, mitigating negative effects on the economy and the purchasing power of citizens

Criticism of the Revenue Increase Strategy

The deputy expressed his firm opposition to the tax increase, arguing that this strategy will not solve the country's fiscal problems.

According to him, the reduction of public spending should be prioritized as a more effective and sustainable solution.

He highlights that the attempt to tax Real Estate Credit Letters (LCIs) and Agribusiness Credit Letters (LCAs) could generate negative consequences for the economy, such as inflation and increased interest rates.

The deputy emphasizes that the impact would be severe in essential sectors, such as agribusiness, where up to 40% of financing depends on LCAs.

Furthermore, he refutes the idea that only the richest would be affected, emphasizing that the measure will increase costs for the entire population, especially the middle class and the poorest.

As mentioned in a article on CNN, the parliamentarian criticizes the view that tax increases are a viable solution.

He believes that the strategy unfairly penalizes the consumer and argues that the focus should be on efficiency and reduction of public spending.

With this perspective, the deputy warns of the risk of compromising growth and economic recovery, drawing attention to the need to rethink current fiscal policies.

Impact of Taxation on the Middle and Lower Classes

The deputy highlighted the proposal to tax Real Estate Credit Letters (LCIs) and Agribusiness Credit Letters (LCAs) and refuted the notion that only the rich would be affected by such a measure.

On the contrary, he stressed that the entire population will suffer from the impacts, especially the middle and lower classes.

LCAs and LCIs are fundamental to the economy and any attempt to tax them will result in additional expenses being passed on to consumers.

Among the vulnerable sectors, agribusiness and construction are at the forefront, suffering directly from the increase in financing costs, which will inevitably fall on the working class.

Furthermore, the potential increase in IOF increases economic difficulties, further damaging the economy in general.

Exemplifying the effects on different income brackets, the taxation measure will prolong financial difficulties:

1. Middle class: increase in the cost of real estate financing, making the dream of owning a home more expensive.
2. Lower classes: increase in the price of basic foods due to costs in the agricultural sector.
3. All: inflation caused by the increase in loan interest rates, compromising the population's purchasing power.

Emphasizing the need for prioritize the reduction of public spending, the deputy stressed that taxing LCIs and LCAs is an unconstitutional approach, harming rather than helping the country's economic recovery, as evidenced here in this link.

Constitutional Arguments against the Increase in IOF

Constitutional Limits The deputy has raised serious doubts about the legality of the IOF increase.

He considers that such an increase violates the Article 150 of the Constitution, which establishes clear limits on the imposition of taxes and taxpayer protection.

In the current case, the government has sought ways to increase revenue in a way that, according to the deputy, appears to deviate from constitutional legality, with an apparent deviation from its purpose.

He argues that the attempt to increase the IOF tax would not only be unconstitutional, but also harmful to the national economy.

Overall Economic Impact According to the deputy, a possible increase in the IOF does not only affect the richest.

The measure imposes additional costs on all sectors of the economy, especially impacting the middle class and the poorest.

As a result, loans and credit in general become more expensive.

This creates a scenario in which consumers and entrepreneurs face increasing difficulties in accessing financial resources, affecting everything from housing to agribusiness.

Considerations of the Deputy He has been emphatic in stating that “tax collection interests should never override the principle of legality and constitutional norms”.

Questioning the logic behind the increase in IOF, he claims that the government should focus more on reducing public spending instead of seeking to increase revenue through potentially illegal taxes.

These concerns resonate with a broader analysis of the effects of such measures on economic stability and social well-being.

In summary, the proposal to tax Letters of Credit brings with it a series of concerns that could affect not only vital sectors of the economy, but also the well-being of the population, especially the most vulnerable.

The priority should be to reduce spending, not to increase the tax burden.