Moraes Halts Brazil IOF Hike, Exposing R$10 Billion Budget Gap

Brazilian Supreme Court Justice Alexandre de Moraes on 4 July issued an injunction suspending both the presidential decree that raised the Imposto sobre Operações Financeiras and the congressional resolution that had overturned the measure. In the ruling, Moraes questioned whether the government’s decree served “purely fiscal” purposes—an objective he said could violate constitutional limits on the tax, which is intended chiefly for monetary regulation. He scheduled a conciliation hearing between the Executive and Legislative branches for 15 July and said the suspension would remain in force until the court reaches a further decision.

The injunction removes an expected R$10–12 billion in 2025 revenue, prompting the government to prepare new spending restraints. Minister of Institutional Relations Gleisi Hoffmann warned that the freeze will slow budget execution across the board, including parliamentary earmarks, while PT lower-house leader Lindbergh Farias said the shortfall could affect health and education programs and “fall on the poorest.” Financial-market commentators noted that the ruling upholds the president’s power to alter the IOF rate but leaves the fiscal outlook uncertain pending the July talks.