* Rousseff plans to cut payroll tax for social security

* Tax would fall to 14 pct over three years -report

* Measure could cost 9.6 bln reais a year

Brazil's President Dilma Rousseff plans a series of payroll tax cuts in coming years in a bid to promote formal hiring at domestic companies, Folha de S. Paulo newspaper reported on Friday, giving no details of its sources.

Under the government's proposal, Brazilian companies that pay a 20 percent tax on their total payroll for social security would pay 18 percent in the first year of the measure, the paper reported.

The tax would fall by two percentage points every year over three years until reaching 14 percent, but it could be extended for a total of six years until falling to 10 percent, Folha said.

Though it would be a boon to employment and local manufacturers, the measure could further increase Brazil's social security deficit, forecast to reach 44.9 billion reais in 2010, the paper added.

Rousseff's predecessor, Luiz Inacio Lula da Silva, made one of the main priorities of his administration to increase the number of workers hired on the payroll and entitled to social security benefits.

About half of Brazil's workforce is not registered with the Labor Ministry and belongs to a vast informal economy.

The tax cuts would benefit companies by lowering hiring costs and could increase the number of Brazilians formally employed to 60 percent of the workforce, Folha said.

The measure would cost 9.6 billion reais ($5.75 billion) in the first year alone to the Social Security Ministry's coffers, or 27.6 billion reais over the three-year period initially planned, the daily reported. (Reporting by Elzio Barreto; editing by Patrick Graham)

Social Security