Brazil Civil Servants Still
Hamper Fiscal Efforts
Dow Jones Newswires
BRASILIA -- An avalanche of lawsuits has, temporarily, exempted 75% of
Brazil's 1.1 million federal civil servants from newly-increased social security
taxes in May, a source at the Budget Ministry told Dow Jones Newswires
Tuesday.
The figure is up from 44% of federal workers who had received favorable
rulings from courts as of last week.
The lawsuits and court rulings, which are preliminary and may be appealed
by the government, are threatening one of the government's most important
austerity measures.
The increased taxation is a piece of a broad 30 billion reals ($1=BRR1.665)
fiscal-squeeze plan that underpinned a $41.5 billion international aid package
for Brazil to pull the country from the verge of economic collapse.
The new social-security taxes, okayed by Congress last January, were
expected to trim the burgeoning deficit of Brazil's public-sector pension
system by BRR2.8 billion in 1999. The federal system gap totaled BRR18
billion in 1997, according to the latest official data available.
A total 823,511 federal civil servants, based in 16 of Brazil's 27 states, have
obtained preliminary injunctions banning the increased bite in their
paychecks. They allege the new tax rate - hiked up to 25% from 11%,
depending on salary - is so high it can be termed a confiscation. The
government has said it will appeal the court rulings.
The Budget Ministry sources said that the lawsuits delayed the closing of
May's federal payroll to later this week, from last Wednesday. Only then will
the government will be able to determine the impact the legal dispute has on
its books.
-By Adriana Arai; (5561) 321-1224; aarai@ap.org
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