That many taxes are charged in Brazil is nothing new. But there are many people who still do not know what they are paying and why. If you still do not know what IOF is, we will help you clear your doubts.
IOF is the acronym that represents the Tax on Financial Transactions, and you have certainly heard of it, whether when paying your credit card bill or when choosing an investment.
This tax is charged on financial transactions such as credit, exchange, and insurance, but it is also present in transactions with some fixed-income securities and in some investment funds if the redemption occurs within 30 days.
To better explain this federal tax that was originally created with the 'mission' of regulating the national economy, continue reading to learn more.
What is IOF?
The Tax on Financial Transactions (IOF) is a federal tax applied to various types of transactions we make daily with our money.
Understanding how this tax works and how it impacts your daily life is essential. After all, you pay for it and often don't even notice.
This tax is paid by both individuals and legal entities that carry out credit operations (loans, exchange, and insurance) or operations related to securities or financial assets.
The percentage of tax on the value depends on the type of transaction being carried out. This rate charged on each transaction is seen as a proportional collection from investments.
With this, the government can have a better understanding of how credit supply and demand are functioning in the country. Moreover, IOF is one of the best sources of revenue in the country.
Here is the secret. If it is one of the best sources of revenue, then a more populist government will use it to cover increased public spending, but do not be fooled, everyone pays this bill.
It also discourages the private sector that generates jobs and income for the country.
