Brazil’s finance minister reduced the projected yearly cost of an income tax exemption to 27 billion reais ($4.75 billion), down from 35 billion reais. The proposal aims to raise the non-taxable income level to 5,000 reais by 2026 and awaits Congressional approval. The government plans compensatory tax measures for wealthier individuals to offset the fiscal impact.
Brazil’s finance minister, Fernando Haddad, announced a revised estimate regarding the cost of the proposed income tax exemption, now projected at 27 billion reais ($4.75 billion) annually. This is lower than the prior estimate of 35 billion reais and includes adjustments based on revisions made to the tax table for the current year.
President Luiz Inacio Lula da Silva’s proposal aims to raise the income tax exemption threshold from 2,824 reais a month to 5,000 reais by 2026. This plan, unveiled last year, is pending approval by Congress, contributing to market volatility at its announcement alongside other budget-cutting measures.
The minimum wage in Brazil increased from 1,412 reais to 1,518 reais this year. The government plans to uphold the income tax exemption for individuals earning up to twice the minimum wage in 2025 before implementing the new threshold in 2026.
Haddad emphasized that the additional fiscal impacts from the increased exemption will be offset by compensatory measures, including tax hikes for the wealthy. He further stated President Lula is scheduled to meet with Senate and lower house leaders to discuss the exemption proposal, expected to be submitted to lawmakers soon.
The Brazilian finance minister’s revised estimate of the income tax exemption’s cost reflects a substantial reduction, now forecasted at 27 billion reais annually. This proposal seeks to increase the tax-exempt income threshold significantly by 2026 and is still subject to Congressional approval. Additionally, compensatory measures are planned to neutralize fiscal impacts, underscoring the government’s intent to balance its budget initiatives with income tax reforms.
Original Source: www.marketscreener.com
