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Teresa Ter-Minassian, former director of the IMF, explains in an interview with Consultor Jurídico that the path to sustainable development in Brazil involves macroeconomic stability, tax cuts, and a new approach to property taxation.
For the Brazil achieve solid, long-term economic growth, it is essential to adopt a stable fiscal policy that attracts investors, reduce tax expenditures, which currently consume between 2% and 3% of GDP, and improve property taxation. This analysis was conducted by economist Teresa Ter-Minassian, former director of the Fiscal Affairs Department of the International Monetary Fund (IMF), during the II Future of Taxation Forum in Lisbon. The expert, who currently works as a senior consultant at the Inter-American Development Bank (IDB), emphasized that, despite the challenges, the Brazilian scenario offers reasons for optimism.
According to Ter-Minassian, in an interview with the portal Counsel, stability is key to providing security to investors, both foreign and domestic, and thus stimulating innovation and increasing potential growth. Without sustainable progress, public debt, already considered high, will continue to grow, which requires achieving significant primary surpluses. The economist argues that the country needs to follow a path of fiscal rigor combined with efficient social policies, with tax reform being a crucial step in this direction.
The pillars for economic stability
The construction of a reliable business environment is the first step towards the development of Brazil, according to Teresa Ter-Minassian's analysis. She points out that a predictable macroeconomic and fiscal policy is essential for “to provide security to investors, to bring in capital and also to motivate domestic investors”The objective is clear: to create a virtuous cycle where trust translates into investment, innovation, and, consequently, greater and more sustainable potential growth.
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As detailed by the economist to Counsel, controlling public debt is an urgent task. To stabilize and, in the medium term, reduce debt, the country needs generate consistent primary surplusesThis means the government must collect more than it spends, not counting interest payments on the debt. The logic is that, with the accounts in order, the pressure on interest rates decreases, creating a more favorable scenario for debt dynamics and the economy as a whole.
Where to cut and where to invest?
The IDB specialist identifies two main fronts for adjusting public accounts without increasing the already high tax burden. Brazil. the first is the reduction of so-called tax expenditures — tax incentives and exemptions, which, according to her, represent “at least 2% to 3% of GDP”. Reviewing these benefits would allow the government to raise more revenue without having to increase existing tax rates. The second front is the search for efficiency gains in public spending, with better prioritization and allocation of resources.
In this sense, Ter-Minassian sees the digital economy as a powerful ally for “better focus on social programs”, ensuring that aid reaches those who truly need it. On the revenue side, she suggests exploring areas of taxation that are still underdeveloped in the country, such as “green taxes and property taxes, which are still quite low” compared to developed countries. She believes new technologies can help overcome challenges such as informality in the real estate market and improve tax collection.
Tax reform as an engine of growth
The ongoing tax reform, focused on consumption taxes, is seen by Teresa Ter-Minassian as a fundamental advance for the Brazil. As reported by Counsel, she believes that the change will have a “positive impact on the country’s potential growth” in the medium and long term. One of the main benefits will be the elimination of “tax wars” between states, a chronic problem that generated distortions and legal uncertainty.
The streamlining of the system, with the unification of taxes such as ICMS into the new IBS (Tax on Goods and Services), will bring greater simplicity and transparency. In addition to the unification, the former IMF director praised the progress in tax administration, which she considers “fundamental to our compliance”More modern and efficient management is crucial to ensure that the new rules translate, in practice, into a fairer and more competitive business environment.
Challenges and a look to the future
Despite the optimism, the economist recognizes that the path of Brazil still has significant obstacles. One of them is the high interest rate, which, to be reduced sustainably, depends on a “great macroeconomic stability” and a favorable external scenario. The reducing the need for government financing, through larger surpluses, is also a factor that would help reduce interest rates, starting a “virtuous circle” for public debt.
Another complex issue is regional inequality. Ter-Minassian believes the solution lies not in giving states autonomy to create their own consumption taxes, but rather in robust “equalization transfer” system, something that, according to her, Brazil does not yet have a formal and efficient manner. She concludes that, although there is no imminent risk of a fiscal crisis, the country needs move forward with structural reforms to ensure its long-term growth, a greater understanding on the part of the political class is necessary regarding the urgency of these changes.
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