BRASILIA — Number 2 at the Ministry of Finance , executive secretary Dario Durigan told Estadão that the government has arguments to convince Minister Alexandre de Moraes , of the Federal Supreme Court, that the increase in the Tax on Financial Operations (IOF) was a regulatory measure, even though it increases government revenue.

Durigan stressed that the Lula government will insist on raising the IOF, but will not end the discussion and put an “end point” to negotiations with Congress. The debate over the nature of President Lula’s decree — whether it is regulatory to correct market distortions or tax-raising to balance the government’s accounts — is a central point in the dispute at the Supreme Court.

This Friday, Moraes decided to invalidate both the executive decree that increased the tax and the legislative decree that overturned the decision. The judge summoned both parties for a conciliation scheduled for the 15th. In the decision, the minister stated that, if the government increased the IOF only for revenue purposes, there was a misuse of purpose.

To Estadão, Durigan stated that the increase in the IOF on credit and exchange operations and also investments in private pension funds of the VGBL type have a regulatory nature, but admits that the result is to increase government revenue.

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“We are very confident in saying that the decree has regulatory fundamentals. We have regulatory arguments presented in the process, explicitly, with the changes to the IOF,” said Durigan. “The fiscal consequence is important, but it is not a basis for the act.”

On Wednesday, the 2nd, in Buenos Aires, Minister Fernando Haddad acknowledged that he is counting on the IOF revenue to cover the 2026 accounts. The government estimates collecting R$12 billion this year and R$20 billion next year with the tax.

Durigan states that the IOF on pension funds, for example, was intended to prevent tax planning by individuals who wanted to pay less tax. And that, in the case of the IOF on credit transactions, the idea was to align the tax with the actions of the Central Bank, which is currently seeking to cool economic activity by raising interest rates to control inflation within the limits of the target.

“The greatest proof that the IOF decree is regulatory is that we have been calibrating it over time and we have done this in dialogue, both with Congress and with the sectors.”

Asked what the Treasury will do if the IOF increase is not permitted, Durigan stated that “there will be relevant fiscal consequences”.

“We are discussing cutting tax benefits . Without the IOF, we will have to make a bigger cut in tax benefits, for example. I think conciliation can be used to make this clear.”

The executive secretary considered, however, that the Treasury's objective in insisting on increasing the tax is not to confront Congress, which largely overturned the Treasury's initiative - 383 deputies, out of a total of 513, voted to cancel the IOF increase.

“This is not the end of the matter. I don’t want to kill the discussion and win in the Supreme Court. But I need us to move forward in the debate. The debate cannot be frozen,” said the secretary. “I will insist in the Supreme Court, but I am not closing the debate with this.”

Despite the setback in the IOF, Durigan states that the economic team is not discussing reviewing the 2026 fiscal target, which is to generate a surplus equivalent to 0.25% of GDP or, at the limit, eliminate the primary deficit in public accounts.

“This debate is not on the table. Our intention is to meet the targets, as we have always done. We would like to achieve more and faster in terms of primary results, but it is not possible.”

For 2025, Durigan said oil revenues could help prevent the government from being forced to tighten spending restrictions this year. The government is set to present another assessment of revenue and spending in the budget on the 22nd.

In May, the government announced that it was holding back R$31 billion in expenses. With the IOF tax being scrapped, PT politicians and members of the economic team warned that Congress' decision would extend the freeze, which would also affect the payment of parliamentary amendments.

On Friday, Durigan said he is waiting for feedback from the technical departments of the Treasury and the Ministry of Mines and Energy to find out whether it will be possible to auction oil extracted from pre-salt areas adjacent to fields that are already being explored in the Santos Basin this year. This operation could yield between R$15 billion and R$20 billion for the government and was approved with the vote on a provisional measure in the Senate last Tuesday, the 1st.

The government also raised more than expected in an auction held last week for oil that is already owned by the Union - the expectation was to obtain R$23 billion and it was R$28 billion.

“The auction is not a trivial thing, it is not an auction that I do like this (and he snaps his fingers quickly), I need to structure an operation. If there is a feasible schedule and I can do the auction this year, we can consider this revenue and have/ more or less the tax consequence of the IOF being overcome.”