Brazil is currently debating an executive order that raises taxes on financial transactions (IOF), prompting discussions about extending the tax to cryptocurrency transactions as a way to offset the broader financial impact.
On May 22, the government announced an increase in the IOF tax, triggering public backlash due to concerns over its wide-reaching effects on the population. In response, lawmakers are exploring alternative measures, including taxing crypto transactions, to reduce the burden on everyday financial activities.
Hugo Motta, president of the Chamber of Deputies, raised the possibility of applying the IOF tax to cryptocurrencies during a public speech ahead of talks with Finance Minister Fernando Haddad and Senate President Davi Alcolumbre. While opposing further tax hikes on the public, Motta expressed openness to expanding the tax base to include crypto transactions.
However, Motta clarified that the idea remains a proposal and no formal decision has been made. The cryptocurrency community in Brazil has expressed mixed reactions. Some experts argue that imposing the IOF tax on crypto would be illegal under current tax laws.
Vanessa Butalla, Vice President of Legal, Compliance, and Risk at Mercado Bitcoin, highlighted that the Brazilian tax authority’s existing treatment of cryptocurrencies does not support such taxation. She compared it to taxing investment property purchases, which are currently exempt.
Legal expert Daniel de Paiva Gomes of Paiva Gomes Advogados told Valor Econômico that any attempt to tax crypto transactions through an executive order would contravene established law. He emphasized that only legislation passed by the National Congress can redefine taxable events to include new asset classes, while the government’s authority is limited to setting tax rates and deadlines.
As the debate continues, Brazil’s approach to cryptocurrency taxation remains uncertain amid wider concerns about the country’s financial policy and tax burden.
Related Topics:
How Do Stablecoins Work and Why Are They Crucial in Crypto?
