Brazil has revealed a tax exemption plan for individuals earning up to 5,000 reais monthly, funded by new taxes on higher earners. This strategy, aimed at improving President Lula’s popularity, is projected to raise significant revenue while maintaining fiscal neutrality. The bill includes a 10% tax on overseas profits and a minimum tax on high-income earners.
On Tuesday, the government of Brazil introduced a plan aimed at providing income tax exemptions for individuals earning up to 5,000 reais (approximately $881.27) per month. This initiative, intended to cover any resulting revenue deficit, will implement new taxes on higher earners and on profits and dividends sent abroad. This move has been deemed a significant strategy by President Luiz Inacio Lula da Silva to bolster his popularity, especially given his declining approval ratings.
The Lula administration maintains that the proposed tax plan is fiscally neutral, a point highlighted by President Lula at a recent event where he emphasized the pursuit of tax justice. The bill, which is expected to gain congressional approval this year to become effective by 2026, incorporates a 10% withholding tax on profits and dividends transferred overseas. The government estimates that this measure will generate an additional 8.9 billion reais annually.
Moreover, the proposal includes the implementation of a minimum effective tax on high-income individuals, applicable to those with annual earnings exceeding 600,000 reais. This tax will increase incrementally, reaching a cap of 10% for gross incomes surpassing 1.2 million reais per year, which is projected to contribute an additional 25.22 billion reais per year in revenue. Despite Finance Minister Fernando Haddad asserting that the bill’s fiscal impact is balanced, the government’s calculations indicate tax exemptions could total 25.84 billion reais next year, although this figure is less than the anticipated revenue increases.
Under the current system, individuals with earnings up to 2,824 reais per month remain exempt from income tax. The proposed reforms signify a noteworthy shift in Brazil’s fiscal policy, targeting tax equity while introducing additional burdens on wealthier citizens.
In summary, Brazil’s new income tax exemption plan aims to alleviate the tax burden on low earners while imposing higher taxes on wealthy individuals and foreign profits. With expected annual revenue increases and a commitment to fiscal neutrality, this initiative also reflects President Lula’s effort to regain favor among the populace amid waning approval ratings. The plan’s ability to balance revenue generation and tax justice will be closely monitored as it moves through Congress.
Original Source: money.usnews.com
