Brazil has announced a plan to exempt individuals earning up to 5,000 reais monthly from income tax, funded by taxing high earners and overseas profits. The proposal is intended to regain President Lula’s popularity and must be approved by Congress by 2026. The initiative includes a new 10% withholding tax on overseas profits.
Brazil’s government has introduced a plan to exempt individuals earning up to 5,000 reais (approximately $881.27) per month from income tax. This initiative aims to regain President Luiz Inacio Lula da Silva’s popularity amidst declining approval ratings. The revenue shortfall will be addressed through new taxes levied on high earners and on profits and dividends sent abroad.
The proposal was initially announced late last year and had elicited concerns regarding its fiscal implications. The administration maintains that the plan will be fiscally neutral, with President Lula emphasizing its alignment with tax justice goals during a recent event. The bill must pass through Congress in order to be implemented by 2026.
It includes a 10% withholding tax on profits and dividends sent overseas, anticipated to generate 8.9 billion reais annually. Additionally, the government plans to impose a minimum effective tax on individuals earning above 600,000 reais, with rates increasing to a cap of 10% for incomes exceeding 1.2 million reais annually, which could yield an extra 25.22 billion reais per year.
Finance Minister Fernando Haddad described the bill as “balanced” fiscally, despite the 25.84 billion reais cost of the tax exemptions projected for the next year. Presently, the income tax exemption threshold stands at 2,824 reais per month.
The Brazilian government has unveiled a significant income tax exemption plan aimed at enhancing tax fairness while addressing fiscal challenges. With the proposed bill targeting low-income earners and high-income individuals, it seeks to improve President Lula’s popularity and fiscal health. Successful implementation is contingent upon legislative approval set for 2026.
Original Source: money.usnews.com
