Monday, November 9, 2009
"Seeking to restrain a surging currency, Brazilian financial authorities announced a tax on foreign investment in local bonds and stocks just days after the nation's president knocked down rumors officials were preparing the measure. Brazil's real, among the world's fastest-climbing currencies, dipped against the dollar Monday on investor expectation that the levy would be imposed. The real has gained about 35% against the dollar this year. ... Government officials are now concerned that the influx of international investment funds that has pushed its benchmark stock index up nearly 80% this year may be too much of a good thing. The 2% tax on foreign investment is designed to prevent currency volatility by damping interest in Brazilian securities among speculative short-term investors. ... Other analysts have speculated that Brazilian officials had more than the currency in mind when levying the tax. Increasede government spending has led to a rising budget shortfall that officials are seeking to plug", my emphasis, John Lyons at the WSJ, 20 October 2009, link: http://online.wsj.com/article/SB125599246090895151.html.
Moral of this story: never believe anything a government official says. Why not let foreigners pay Brazilian taxes?