Brazil’s Finance Minister re-estimated the cost of the income tax exemption proposal at 27 billion reais ($4.75 billion) annually, down from 35 billion. The initiative seeks to raise the tax-exempt income threshold to 5,000 reais per month by 2026. Compensatory measures are planned to offset fiscal impacts, and discussions with Congress are imminent.
Brazil’s Finance Minister, Fernando Haddad, announced a reduced estimated cost for the proposed income tax exemption, now projected at 27 billion reais ($4.75 billion) annually, a decrease from an earlier figure of 35 billion reais. This revised calculation considers adjustments to this year’s tax table. The proposal aims to increase the income tax exemption threshold from 2,824 reais per month to 5,000 reais as of 2026, affecting individuals earning up to twice the minimum wage.
The proposal, which will proceed to Congress, initially contributed to a sell-off in local markets when introduced alongside cost-cutting measures. The minimum wage has risen from 1,412 to 1,518 reais this year, with intentions to uphold the exemption for those earning up to double the minimum wage in 2025, prior to introducing the new threshold in 2026.
Haddad has reassured that the fiscal implications of the increased tax exemption will be counterbalanced by compensatory measures, including tax increases for wealthier individuals. He also mentioned that President Lula is scheduled to meet with Senate and lower house leaders to further discuss the exemption proposal, which is anticipated to be sent to lawmakers the same day.
In conclusion, Brazil’s Finance Minister has indicated that the projected fiscal impact of the income tax exemption proposal is less than initially feared, reflecting a recalculation in light of current tax conditions. The proposal aims to raise the income tax exemption threshold significantly, and while it may introduce some costs, the government plans to mitigate these through additional measures. Ongoing discussions with legislative leaders are expected to facilitate the progress of this initiative.
Original Source: www.marketscreener.com
