Government studies changing IR deductions and exemptions to increase revenue, says agency

The Ministry of Finance is preparing a new package of measures to expand tax collection through changes in deductions and exemptions from the Individual Income Tax, according to a survey by Reuters agency with government interlocutors.

The objective is to increase the public coffers by more than R$ 100 billion a year to reach the primary surplus goals foreseen in the project of the new fiscal rule, which will be voted in the Chamber of Deputies next week. The government estimates that, in 2024, the tax exemption with income exempt from the Individual Income Tax will be R$ 51.1 billion, in addition to R$ 31.3 billion with deductions.

Among the changes intended by the team of Minister Fernando Haddad is to restrict deductions that reduce the tax calculation base, such as medical and educational expenses. These deductions have already been the target of criticism by President Luiz Inácio Lula da Silva (PT) even before assuming his third term.

At the end of last year, he classified the reduction of health expenses, for example, as a “contradiction”. “Who is paying for the treatment we have is the poor who have no rights in this country, it is the poor who do not have a specialist, it is the poor who do not have health insurance”, he said.

Another measure discussed internally in the ministry is the taxation of profits and dividends by companies and their shareholders, which is currently exempt from payment, and the periodic collection of Income Tax on exclusive investment funds, which is currently only levied at the time of redemption.

Measures can reach the middle class of the population

The measures are seen by the opposition as a setback to the Brazilian middle class, from whom Lula even tried to nod in February. At the time, members of the PT leadership assessed that the party was worn out with this portion of the population, and should establish specific measures, such as a special financing line for Minha Casa, Minha Vida and the expansion of the National Support Program for Micro and Small Companies (Pronampe).

However, for Senator Sérgio Moro (União Brasil-PR), the measures studied for the reform of the Individual Income Tax sound more like a “revenge” than a wave.

“After the PT, in an act of revenge, attacked Deltan Dallagnol, the Lula Government prepared its revenge against the middle class to close the uncontrollable accounts of a spending government. They want to raise income tax. Enough,” he said in a post on twitter on the morning of this Thursday (18).

In mid-April, Federal Revenue Secretary Robinson Barreirinhas stated that the government was working on additional revenue measures to be presented in the second half of this year, but without creating or raising taxes. The objective, he said at the time, would be to start taxing those who are not paying, “but should”.

The Finance Ministry was contacted by Reuters but declined to comment on the measures. On other occasions, members of the economic team said that a reform of the Income Tax should be presented after the appreciation of the tax reform on consumption, which is under discussion in Congress.

On the other hand, sources heard by Reuters say that the Income Tax reform has not yet been officially presented to the public because it is “complicated”.

Similar measures were also studied by former Minister Paulo Guedes, of the Economy, of the government of Jair Bolsonaro (PL), but they did not advance. One of them even suspended the 20% discount for taxpayers who make the simplified declaration.