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Brazil's highest court supports Lula's tax increase, exempts forfait

The highest court in Brazil upheld the majority of a controversial decree by President Luiz-Inacio Lula Da Silva to raise the Financial Operations Tax. This was a win for the government, as it increased revenue.

Judge Alexandre de Moraes has ruled only that the tax increase on forfait, which is the advance payment made to suppliers and previously treated as credit operations by the government, will be reduced.

Congress had suspended the decree, which included tax increases on other financial transactions like credit, foreign exchange and private pension transactions. This led to the dispute being brought to the Supreme Court.

Brazil's Finance Ministry issued a press release that welcomed the decision of the court, saying that it would help restore harmony among branches of government.

It said that blocking the proposed IOF on forfait payments would result in a revenue loss of 450 millions reais ($80.9m) this year, and a further 3.5billion reais by 2026.

According to the ministry, this entire decree will boost state coffers in the amount of 12 billion reais by 2026. ($1 = $5.5678 reais). (Reporting and writing by Andre Romani, editing by Chris Reese, Sarah Morland and Chris Reese in Brasilia)

(source: Reuters)