Government announces income tax exemption for up to 5 thousand reais

The Minister of Finance, Fernando Haddad, was already studying fiscal adjustments and spending cuts to protect the economy with his team. And one of these measures was announced yesterday, Wednesday (11/27), which is to extend income taxes only to those with an income exceeding R$5,000, which was a campaign promise from current president Luiz Inácio Lula da Silva. Even today, Haddad and other ministers detailed the plan at a press conference, arguing that it should be “the biggest income reform in our history” and saying that tax reform is “assumption of neutrality”.

Those who defend, compared to those who are against

The reform is controversial for those who claim it is not the time to announce tax waivers. And those who defend the equality that taxation can bring to individuals. It is worth noting that, with the new measure, the floor is now 5 thousand reais and the rate range is 27.5%. Thus, the value of the current progressive table will change as the new minimum ceiling reaches the maximum value of the current rate of R$4 thousand and 664 reais and 68 cents.

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_{Haddad and Lula (Photo: reproduction/Getty Images Embed/EVARISTO SA)}

Tax lawyer, Leonardo Branco, assesses for CNN Brasil that the measure becomes important, as IR should only apply to what may exceed the existential minimum. The minimum for a person to live is to guarantee their fundamental rights, such as health and education.

As for the professor at the Brazilian Institute of Tax Studies, Rodrigo Schwartz, he draws attention to the fact that the timing of the announcement makes implementation a challenge. It highlights that the loss of revenue could worsen the public deficit, at a time when the government is seeking stability in public coffers.

Dollar at 6 reais after the announcement of the tax package

The US currency is operating sharply today, rising 1.34% to R$5.9925 and reaching a high of R$6.0005 after Haddad's announcement detailing the fiscal package and tax exemption. For Santander economist, Ítalo Franca, in an interview with Exame magazine, he says that the measures are important, but they generate uncertainty in the fiscal and economic scenario until the potential of the package is realized. “The measure could increase the fiscal impulse in an already heated economy. Although the value of R$70 billion is relevant, there are doubts regarding the estimates of what was discussed today”declared the economist.

The government's estimate

The government hopes that the proposal will be debated in Congress next year. The Finance Minister believes that 2025 is the ideal year for this discussion, as the agenda is calm and without elections. The new proposal should benefit 36 ​​million taxpayers, around 78% of those who declare income tax. According to Haddad, the package will generate R$70 billion over the next two years, boosting the economy. With the package, the announced spending cut will generate an impact of R$327 billion over the next 6 years, starting in 2025.

Featured photo: Finance Minister Fernando Haddad in an official statement yesterday, 11/27 (Reproduction/YouTube/Canal Gov)