Brazil’s Finance Minister, Fernando Haddad, stated that the estimated cost of a proposed income tax exemption has been revised to 27 billion reais ($4.75 billion) per year, down from 35 billion reais. This proposal aims to raise the tax exemption threshold for certain earners, with discussions set to continue with Congress leaders.
Brazil’s Finance Minister, Fernando Haddad, announced a reduction in the estimated costs of the proposed income tax exemption, now projected at 27 billion reais ($4.75 billion) annually, down from an earlier estimate of 35 billion reais. This adjustment follows a recalculation that considered revisions to the current tax table.
The proposal, initiated by President Luiz Inacio Lula da Silva, seeks to raise the income tax exemption threshold from 2,824 reais a month to 5,000 reais by 2026. Initially revealed alongside various expense-reduction measures, this tax exemption plan triggered market sell-offs towards the end of 2024.
The minimum wage has recently increased from 1,412 reais to 1,518 reais. The government plans to maintain the income tax exemption for incomes up to twice the minimum wage in 2025, before implementing the new 5,000-real cap in 2026. Minister Haddad previously stated that the financial implications of this tax increase would be balanced through compensatory actions, including potential tax hikes for the wealthiest.
On Tuesday, President Lula is set to convene with leaders from both the Senate and lower house to discuss the tax exemption proposal, which is to be presented to lawmakers on the same day.
In summary, the Brazilian government’s income tax exemption proposal, initially estimated at 35 billion reais, has been revised down to 27 billion reais. This adjustment reflects a comprehensive review of the tax landscape. The proposed changes aim to alleviate tax burdens on low- to middle-income earners while ensuring that the fiscal impacts are counterbalanced by increases in taxes on wealthier individuals. Discussions with legislative leaders will facilitate the next steps for this proposal.
Original Source: www.marketscreener.com
