BM&FBovespa to Propose Alternatives to ‘Faulty’ Tax - Bloomberg.com

By Paulo Winterstein

Oct. 21 (Bloomberg) -- BM&FBovespa SA, Latin America’s biggest exchange, plans to press the Brazilian government for alternative ways to curb gains in the currency as a tax on investments sent stocks to the biggest drop in four months.

The benchmark Bovespa index tumbled 2.9 percent yesterday after Finance Minister Guido Mantega announced a 2 percent tax on foreign purchases of fixed-income securities and equities. The levy, higher than a 1.5 percent tax scrapped a year ago that didn’t cover stocks, will hurt Brazilian investors and small- and medium-sized companies, according to Carlos Kawall, chief financial officer of Sao Paulo-based BM&FBovespa.

“We need to do everything we can from now on, talking to the government, getting support from everyone who sees that this is something that is definitely faulty and could be altered,” Kawall, a former Treasury Secretary who served under Mantega in 2006, said during a conference call yesterday.

International investors, who account for about a third of BM&FBovespa’s stock trading, will likely buy American depositary receipts, punishing smaller Brazilian companies who can’t afford the costs of listing overseas, Kawall said. The fact that money raised through ADRs is seen as direct investment and isn’t taxed, while local capital raising will be subject to the levy, is one of the “inconsistencies” in the regulation, he said."

BM&FBovespa to Propose Alternatives to ‘Faulty’ Tax - Bloomberg.com