Brazil has introduced an income tax exemption for individuals earning up to 5,000 reais monthly, funded by new taxes on high earners and overseas profits. This plan is crucial for President Lula to regain popularity amidst declining approval ratings and is anticipated to be fiscally neutral. It also introduces effective taxation measures for high-income Brazilians.
Brazil’s government has announced an income tax exemption plan aimed at individuals earning up to 5,000 reais ($881.27) monthly. To compensate for the revenue loss, the proposal includes new taxes on high earners and on profits and dividends sent abroad. This initiative is part of President Luiz Inacio Lula da Silva’s strategy to enhance his popularity amid declining approval ratings.
The Lula administration maintains that this plan will remain fiscally neutral, with the President emphasizing its role in promoting tax fairness. The proposal features a 10% withholding tax on profits and dividends sent overseas, with expectations to generate additional revenue totaling 8.9 billion reais annually.
In addition, the government plans to establish a minimum effective tax rate for high-income earners. This tax would apply to annual incomes exceeding 600,000 reais and incrementally reach a maximum of 10% for incomes above 1.2 million reais per year, projected to raise 25.22 billion reais a year in revenue.
Finance Minister Fernando Haddad described the bill as balanced from a fiscal perspective, although estimates indicate that the cost of tax exemptions could reach 25.84 billion reais next year, falling short of the anticipated revenue gains. Currently, individuals earning up to 2,824 reais per month are exempt from income tax.
The Brazilian government’s newly proposed income tax exemption plan aims to relieve lower-income individuals by exempting those earning up to 5,000 reais monthly. The fiscal gap will be filled by imposing taxes on high earners and overseas profits. This initiative is crucial for President Lula’s attempt to recover his popularity, despite concerns about its fiscal impact. The proposal’s success hinges on its expected balance between revenue generation and tax relief.
Original Source: money.usnews.com
