Brazil’s Finance Minister Fernando Haddad lowered the projected cost of a new income tax exemption proposal to $4.75 billion annually, down from $35 billion. The proposal, aiming to raise the exemption threshold by 2026, is pending congressional approval and discussions with legislative leaders.
Brazil’s Finance Minister, Fernando Haddad, announced a revised estimate for the government’s income tax exemption proposal, indicating it would cost approximately 27 billion reais ($4.75 billion) per year. This adjustment reflects a recalibration based on the updated tax table for the current year and is lower than the prior estimate of 35 billion reais.
The proposal, introduced by President Luiz Inacio Lula da Silva, aims to raise the income tax exemption for individuals earning from 2,824 reais monthly (twice the minimum wage) to 5,000 reais by 2026. This initiative, which must still be approved by Congress, contributed to market volatility following its announcement along with budget-cutting measures late last year.
In 2023, the minimum wage increased from 1,412 to 1,518 reais. The government plans to uphold the income tax exemption for those earning up to double the minimum wage until 2025, when the new threshold will take effect. Minister Haddad emphasized that the financial implications of the exemption will be offset by compensatory strategies, including increased taxes on wealthy individuals.
Haddad also mentioned that President Lula is scheduled to meet the leaders of the Senate and lower house to discuss the tax exemption proposal further, with intent to present it to lawmakers soon.
In summary, Brazil’s Finance Minister has announced a revised cost estimate for the proposed income tax exemption, reducing it to $4.75 billion annually. This adjustment underlines the government’s strategic handling of the fiscal implications while introducing a significant tax plan aimed at alleviating the financial pressures on lower-income earners. The proposal’s success hinges on necessary legislative approval and compensatory measures to maintain fiscal balance.
Original Source: www.marketscreener.com
