SAO PAULO/BRASILIA, July 14 (Reuters) - Brazil is hoping to raise 100 billion reais ($19.64 billion) with a much-awaited income tax reform proposal, Economy Minister Paulo Guedes said on Wednesday, as the government sharply raised its economic growth forecast for 2021. Brazil’s economy ministry on Wednesday said gross domestic product in Latin America’s largest economy should grow 5.3% this year, up from its previous forecast of 3.5%. It also raised its 2021 inflation expectations to 5.90% from a previous forecast of 5.05%. Still, the central bank, which operates independently of the ministry, said earlier on Wednesday that Brazil’s economy had shrunk in May, surprising economists who had expected it to grow. The IBC-Br economic activity index, a leading indicator of GDP, fell a seasonally adjusted 0.43% in May, compared with the median forecast of a 1.00% rise in a Reuters poll of economists. Overall, the revisions and announcements show that Brazil’s government is bullish on the economic recovery, despite the fact that the country is suffering one of the worst death tolls in the world due to the coronavirus pandemic. Guedes told reporters Brazil had already raised 100 billion reais in tax revenue in excess of expectations, and that an income tax reform proposal presented this week would raise another 100 billion reais. The proposal will lower Brazil’s corporate income tax, but add taxation on corporate dividends and reduce subsidies to generate additional tax revenue, Guedes said. Corporate taxes could be reduced by as much as 12.5 percentage points, Guedes said, from a current corporate income tax of 34%. Guedes stressed that he does not want to tax companies, but rather tax the “rich owners” who benefit from the profits of those companies. Currently, Brazil does not tax dividend income. The reform has been presented to Congress, which still needs to discuss it, and could significantly modify it. $1 = 5.0907 reais Reporting by Camila Moreira and Ricardo Brito Editing by Paul Simao Our Standards: The Thomson Reuters Trust Principles.