Brazil’s finance minister cuts income tax exemption cost estimate to $4.75 billion, down from $7 billion. The proposal aims to raise the tax exemption threshold for individuals earning up to 5,000 reais by 2026. President Lula will discuss the proposal with congressional leaders soon, aligning it with compensatory fiscal measures.
Brazil’s Finance Minister Fernando Haddad announced a revised cost estimate for the proposed income tax exemption, lowering it to 27 billion reais (approximately $4.75 billion) annually. This figure reflects a correction of this year’s tax table, making it less than the previous estimate of 35 billion reais.
The government’s proposal seeks to raise the income tax exemption threshold for individuals earning between 2,824 and 5,000 reais monthly by the year 2026. This initiative, introduced late last year, was part of a broader plan that included measures to cut expenses. Following the proposal’s announcement, local markets experienced a sell-off, highlighting concerns about its fiscal implications.
With the minimum wage rising to 1,518 reais this year, the government plans to sustain the tax exemption for those earning up to double the minimum wage in 2025, leading to the new threshold in 2026. Previously, Haddad assured that the fiscal impact of this tax exemption would be balanced through compensatory measures, such as increased taxes on wealthier individuals.
On Tuesday, President Lula is scheduled to discuss the exemption proposal with leaders of both the Senate and the lower house prior to presenting it to Congress. Negotiations regarding the proposal are expected to take place immediately.
In summary, Brazil’s Finance Minister has revised the estimated cost of the income tax exemption proposal to 27 billion reais annually. The initiative aims to benefit individuals earning up to 5,000 reais monthly by 2026. There are plans to offset the fiscal impact through compensatory tax measures targeting the wealthy. Discussions in Congress are anticipated shortly, further shaping the proposal’s future.
Original Source: www.marketscreener.com
