It is better to tax the rich on their income than on their assets, says director of the Ministry of Finance – 04/04/2023 – Market

The best way to increase the taxation of the richest people is with good taxes on income and inheritance, not with the institution of a tax on great wealth accumulated in the form of wealth.

This is the assessment of economist Rodrigo Orair, director of the Department of Tax Reform of the Ministry of Finance, made during an event held by Bradesco BBI this Tuesday (4).

At the event, he was asked about the government’s tax reform proposals, including income, consumption and payroll. He was also asked about the ministry’s vision of a Wealth Tax.

“We are working with income tax, not wealth. If you have a good income and inheritance tax model, you can dispense with wealth taxation,” stated Orair.

In this first semester, Congress is discussing changes in consumption taxation and also minor changes in taxes on inheritance (ITCMD) and property (IPTU and IPVA), based on proposals that are already in Parliament. In the second half, the government should present a proposal to deal with Income Tax and payroll.

Questioned about the “pejotization” of several professionals who adhere to the presumed profit system —used in general by those with annual revenues above R$ 4.8 million and below R$ 78 million—, the director defended three measures: exempting the sheet, review the parameters of this framework and tax dividends.

He stated that the ministry has “a good list of alternatives” to go with these changes, but that there is no defined model.

When talking about the taxation of dividends, he stated that Brazil needs to take advantage of the international movement to increase the rate on distributed profits and reduce IRPJ taxation.

Brazil has a corporate tax rate of 34%, one of the highest in the world. It is also one of the only ones that does not tax dividends, a choice made in the 1990s to concentrate taxation on legal entities.