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Brazil government begins legal analysis to challenge tax-hike reversal

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2025-06-27

Brazil government begins legal analysis to challenge tax-hike reversal

By Reuters

June 27, 2025 3:19 PM UTC Updated ago

A general view of the plenary chamber of deputies during a session at the National Congress in Brasilia, Brazil December 18, 2024. REUTERS/Adriano Machado/File Photo Purchase Licensing Rights , opens new tab

BRASILIA/SAO PAULO, June 27 (Reuters) – The office of Brazil’s solicitor general said on Friday it was conducting technical analyses that could lead the government to take legal action against the decision by Congress to overturn a tax hike on some financial transactions.

The AGU office said in a statement it had started the review at the request of President Luiz Inacio Lula da Silva and asked the finance ministry for supporting information.

“As soon as the analysis is completed, the AGU will announce its decision,” it added.

Both chambers of Congress dealt a major blow to the Lula administration on Wednesday when they voted to nix a decree raising the financial transactions tax levied on certain credit, foreign-exchange and private pension plan operations.

The government opted for the move in May as a way to boost revenue and limit spending freezes needed to comply with its fiscal rules. The decree, however, faced immediate backlash from lawmakers, who said they would not approve tax hikes.

Newspaper O Globo reported earlier on Friday that the government had decided to file a lawsuit with the Supreme Court as it believes Congress overstepped its constitutional powers by reversing the decree.

Finance Minister Fernando Haddad had already hinted on Thursday about potentially taking the matter to court.

Reporting by Ricardo Brito in Brasilia and Gabriel Araujo in Sao Paulo; Editing by Mark Porter, Emelia Sithole-Matarise and Matthew Lewis

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