Brazil Senate passes austerity bill in win for Rousseff

BRASILIA: Brazil's Senate approved a bill to roll back payroll tax breaks on Wednesday that is a key measure in President Dilma Rousseff's efforts to reduce a gaping fiscal deficit and restore confidence in her government's accounts.

The Senate voted 45-27 to pass the bill. It was received from the lower house with no changes, so it will go to Rousseff to be signed into law without delay.

The vote puts an end to months of heated debate over the final major piece of legislation in Rousseff's fiscal austerity plan aimed at saving Brazil's threatened investment grade credit rating.

Though a victory for Rousseff, the bill was watered down in the lower house, where lawmakers voted to maintain tax breaks for several businesses, such as call centres, transport companies and the poultry industry, among others.

These changes to the government's original bill reduced the generation of new fiscal revenues to 10 billion reais ($2.8 billion) a year from the planned 13 billion reais.

Rousseff has struggled to pass austerity measures through a rebellious Congress, with the lower house approving bills that raise spending introduced by Speaker Eduardo Cunha, who broke with her coalition and defected to the opposition last month.

Rousseff, who was narrowly re-elected last year, made a policy U-turn in February and announced she was going to double the social security tax rate on corporate gross revenue, reducing payroll tax breaks for 56 business sectors.

The roll-back is part of her effort to undo fiscal measures that were aimed at stimulating the economy during her first term but which eroded the government's accounts and raised fears about the country's financial health.

Other government measures that reduced pension and unemployment benefits have cleared Congress, but they were also diluted by lawmakers, reducing their effect on fiscal savings.