Last Minute U-Turn: Brazil Backtracks on Controversial IOF Tax Hike

Brazil's Government Partially Reverses IOF Hike After Market Uproar Brazil's economic policy saw a significant shift on May 27, 2025, when the government partially reversed a recent increase in the IOF (Imposto sobre Operações Financeiras), a tax on financial transactions. This decision followed direct intervention from President Luiz Inácio Lula da Silva, who was alerted to the potential market turmoil by Central Bank President Gabriel Galípolo. According to sources close to President Lula, Galípolo expressed serious concerns about the IOF increase's impact, particularly on capital controls. He reportedly received numerous calls from market players already experiencing significant volatility. "Galípolo was surprised," one source stated, "because increasing the IOF for capital remittances from funds to overseas was never even considered." This prompted President Lula to consult with his closest advisors. Initially, Secretary Dario Durigan indicated that the Central Bank was aware of the measures. However, Finance Minister Fernando Haddad later contradicted this statement on social media. Galípolo himself publicly voiced his dissent on May 28, highlighting his prior opposition to the measure in December 2024. The partial reversal helped to calm market anxieties and likely prevented a significant rise in the value of the dollar.