By Marcela Ayres and Patricia Duarte

By Marcela Ayres and Patricia Duarte


BRASILIA (Reuters) - Brazil is likely to announce higher taxes on gasoline on Thursday to help meet this year's budget target during a slow economic recovery, a government source said.


A second source with knowledge of the discussions said the possible tax increase could be implemented through a hike in federal value-added taxes. The source did not rule out a small increase in import taxes on the fuel too.


The Finance Ministry declined to comment on the matter. But Finance Ministry officials were planning to use the tax hikes to raise an additional 10 billion reais ($3.2 billion) this year.


Gasoline tax increases would have little inflationary impact after successive price cuts by state-controlled oil company Petroleo Brasileiro SA, known as Petrobras. They would also help ethanol producers become more competitive with the fossil fuel after years of heavy losses in the biofuel industry.


The government is aiming for a budget deficit of 139 billion reais ($44.1 billion) this year before interest payments. Officials have said they would take any necessary measures to meet that goal, after years of misses that cost the country its investment-grade credit rating.

Federal tax revenues rose in June as job creation improved, data showed earlier on Wednesday, but proposed changes in Congress to a tax debt amnesty program, if confirmed, would also cause a "significant" reduction in estimates for tax collection this year, Finance Minister Henrique Meirelles said last week.

($1 = 3.15 reais)

($1 = 3.1491 reais)

(Reporting by Marcela Ayres and Patricia Duarte; Writing by Silvio Cascione and Tatiana Bautzer; Editing by David Gregorio and Andrew Hay)