Brazil’s Finance Minister Revises Tax Exemption Cost to $4.75 Billion

Brazil’s Finance Minister Fernando Haddad has revised the estimated cost of an income tax exemption proposal to $4.75 billion annually, down from $35 billion. The plan, which is aimed at increasing the exempt income threshold to 5,000 reais by 2026, is expected to be presented to Congress. The fiscal impact will be counterbalanced by taxes on wealthier individuals.

Brazil’s Finance Minister Fernando Haddad announced a revised assessment of the financial implications regarding the proposed income tax exemption. The new estimated cost is 27 billion reais (approximately $4.75 billion) per year, which is a reduction from the previous estimate of 35 billion reais. This recalculation considered adjustments made to the tax table for the current year.

The proposal, which was introduced late last year, aims to raise the income tax exemption threshold from 2,824 reais monthly, equivalent to twice the minimum wage, to 5,000 reais by 2026. Although the initiative has not yet been submitted to Congress, it had previously caused a sell-off in local markets upon its announcement alongside other expenditure-reduction measures.

Additionally, the minimum wage increased this year from 1,412 to 1,518 reais. The government plans to uphold the tax exemption for individuals earning up to twice the minimum wage in 2025, with the new threshold set to take effect in 2026. Minister Haddad also indicated that these changes would be offset by measures, including higher taxes on affluent individuals.

Minister Haddad further stated that President Lula is scheduled to meet with leaders from both the Senate and the lower house to discuss the exemption proposal, likely to be forwarded to lawmakers thereafter.

In summary, Brazil’s Finance Minister Fernando Haddad has revised the estimated cost of the proposed income tax exemption to $4.75 billion yearly, taking into consideration updates to the tax table. The proposal aims to raise the exempt earnings threshold significantly by 2026 while maintaining a structure to offset the fiscal impact through taxes on the wealthy. Discussions regarding this proposal are set to continue with key legislative leaders.

Original Source: www.marketscreener.com