BRASILIA, June 12 (Reuters) - Brazil's Finance Minister Fernando Haddad on Thursday sought to prevent the country's new fiscal package from being labeled a simple tax hike, saying that the measures would allow the government to meet its fiscal target and not affect most people's daily lives.

Haddad's remarks came as the executive order unveiled late on Wednesday by President Luiz Inacio Lula da Silva's administration faced initial pushback from lawmakers, with many calling for spending cuts instead of tax increases.

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The package includes higher taxes on online betting platforms, a unified income tax rate for financial investments, the elimination of lower duties applied to financial firms, and new mechanisms to limit the use of tax offsets by companies.

It was designed to compensate for the rollback of a controversial tax hike on some credit, foreign exchange and private pension operations, which had also triggered a strong backlash from lawmakers and business people when it was unveiled last month.

Combined with additional dividend payments from state-run companies and a planned extraordinary oil auction, the new measures are expected to bring in about 20 billion reais ($3.61 billion) this year, Haddad told reporters.

"It makes no sense calling this a tax hike... We must correct the distortions in public accounts," Haddad said, as Latin America's largest economy targets the elimination of its primary deficit this year.

He argued that overhauling the financial sector's tax framework would level the playing field and "doesn't impact people's lives," while the increased levies on betting platforms target "an activity that doesn't create a single job."

According to a document released by the government, the new package is expected to generate 10.5 billion reais in additional revenue this year, with 10 billion reais coming from stricter rules on the use of tax offsets.

Next year, when the new income taxation rules would take effect, the estimated revenue gain is 20.9 billion reais.

The package faced resistance in Congress even before its formal submission, prompting Haddad to downplay criticism that it would increase the burden on companies and individuals.

It also includes a 5% income tax on all currently exempt debt securities, which total 1.7 trillion reais and, according to Haddad, were creating a market distortion and costing the government 41 billion reais in lost revenue.

Since taking office in 2023, the leftist Lula administration has prioritized revenue-raising measures to restore fiscal balance following a surge in public spending, particularly on social and pension programs.

Many lawmakers, including from the ruling coalition, signaled they would not support new tax measures unless accompanied by spending reductions, though Congress has either blocked or watered down the cuts proposed by the government so far.

($1 = 5.5348 reais)

https://www.reuters.com/world/americas/brazil-expects-annual-fiscal-boost-72-billion-new-measures-2025-06-12/