Controversial leader Jair Bolsonaro is leaving office after just one term as Brazil’s president, but he has set out the fundamentals for tax reform in Latin America’s leading economy.
While Brazil’s tax reform is still a work in progress, the Bolsonaro administration laid down much of the detail of the changes. Bolsonaro set out a plan for tax reform to align Brazil’s complex transfer pricing (TP) regime with OECD guidelines.
He wanted Brazil to join the OECD, and taking the country back to the arm’s-length principle was a part of the price of doing so. Brazil would have to give up its formulaic system of taxation to comply with OECD standards.
Bolsonaro will soon be leaving his role as president. However, Brazil still hopes to join the OECD under his successor. The return of former president, Luiz Inácio Lula da Silva, widely known as Lula, marks the end of the Bolsonaro years.
Some tax directors are concerned that the victory of Lula could delay the tax reform further, but others think he is unlikely to change course; Lula has set out proposals for raising more tax revenue – and the TP reforms could help achieve this.
