UPDATE 1-Brazil's Guedes says 10% tax on dividends could be approved this year

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BRASILIA, May 19 (Reuters) - Brazil Economy Minister Paulo Guedes said a small tax reform may be approved by Congress this year that would include a 10% tax on dividends, which are currently exempt.

Guedes, speaking at an event hosted by financial start-up Traders Club, said the reform would also create a tax debt renegotiation program and lower corporate income tax but at a lower level than previously targeted by the government.

The reform would be more limited than a proposal approved in the Lower House last year but not voted on in the Senate. That proposal set a 15% tax on company dividends.

The minister said that if the current center-right coalition prevails in elections this year, it would be "natural" for him to stay in the federal government for a potential second term of President Jair Bolsonaro, who is seeking re-election in October.

According to Guedes, the coalition is advancing and the Congress is becoming more reformist.

"The band seems to be playing well," he said. (Reporting by Marcela Ayres; editing by Jonathan Oatis and Mark Porter)