Sao Paulo, Jun 26 (AP) Brazil's Congress on Wednesday nullified a presidential decree for the first time in decades, rejecting a move by President Luiz Inácio Lula da Silva to hike a financial transactions tax and signalling flagging support for his left-of-centre administration.

Lula's allies had only 98 votes against 383 in the lower house to keep the tax increase on some transactions, including foreign exchange and credit cards. Two hours later, senators also defeated the decree.

It was the first time lawmakers overturned a presidential decree in Brazil since 1992, in a rebuke of Lula one year ahead of the country's next presidential election campaign.

The rejection came despite members of Lula's administration saying that the content of the decree had been negotiated with legislative leaders, including Speaker Hugo Motta and Sen. Davi Alcolumbre, the president of the Senate.

Motta, seen as a moderate, said that the vote “speaks for itself” and that “Each branch of power has to understand the other's limits. That's democracy." He did not elaborate.

Thomas Traumann, an independent political consultant and former Brazilian minister, said the decision by lawmakers indicates Lula does “not have a stable majority in Congress.” He called it a historic defeat for the president about a year before the campaign trail begins.

“If this was a parliamentary system, it would have been the end of this government," Traumann said.

The previous president to have a decree nixed by Congress was Fernando Collor more than 32 years ago, only weeks before he was impeached and removed from office. His decree at the time was about government-issued bonds.

Since the presidency of Michel Temer between 2016 and 2018, Brazil's congress has had control over much of the country's budget, but the president can raise some taxes by decree.

Finance Minister Fernando Haddad said on Thursday the Brazilian government is considering three alternatives to deal with Congress' decision — take it to the Supreme Court, seek new sources of income or slashing the country's budget. (AP) GSP

Presidential decree nullification halts a decree-based tax hike and forces the government toward judicial review, new revenue, or cuts. Congress nullified a presidential decree increasing a tax on certain financial transactions, exercising legislative oversight to annul an executive fiscal measure enacted by decree. The votes in both chambers indicate weakened executive support and produce immediate fiscal choices for the government: pursue judicial review, identify alternative revenues, or effect budgetary cuts. The event underscores the constraint on decree-based tax changes where legislative repeal and budget control intersect.