Brazil announces tax increase and spending cuts for 2016 budget

BRASILIA, Brazil, Sept. 15 (UPI) -- Brazil on Monday announced plans to close a hole in its 2016 budget by raising $8 billion through a financial transactions tax and by cutting $6.8 billion in spending.

Budget cutting measures include reducing the amount of government ministries from 39 to 29, cutting 1,000 public-sector jobs, capping salaries for civil servants and trimming social services such as sanitation and housing.

The unpopular CPMF financial transaction tax, which expired in 2007, will be reintroduced at a rate of 0.2 percent. The austerity measures were announced by Finance Minister Joaquim Levy and Planning Minister Nelson Barbosa.

"We know this effort to cut spending will only take us so far, so as would happen in any country in the world in a moment of reduced economic activity and tax income, you have to seek out other resources," Levy said at a press conference. "We're trying to find that balance."

The austerity measures need congressional approval. The budget announcement follows Brazil's investment-grade credit downgrade to "junk" status by Standard & Poor's.

Brazil is dealing with a political crisis surrounding President Dilma Rousseff, who has been accused of corruption as the Petrobras bribery scandal continues. Brazil's recession has been worsened by a continuous fall in the price of commodities.

Rousseff headed Petrobras, a semi-public oil and gas company, as apparent briberies took place. She was exonerated by authorities, but senior members of her government have been charged. Protests throughout Brazil have called for Rousseff's impeachment or resignation, as her approval is consistently below 10 percent.