On Tuesday (18), Brazil’s Luiz Inácio Lula da Silva (Workers’ Party) signed a bill proposed by the Executive to exempt workers with gross salaries of up to BRL 5,000 (US$ 879) from paying income tax. He handed the text to the President of the Chamber of Deputies, Hugo Mota (Republicans Party). Currently, Brazil’s income tax exemption is US$ 496, less than two times the minimum wage.
The bill addresses a promise Lula made during his 2022 presidential campaign. “Justice is a simple thing to say but difficult to put into practice,” said the president at a ceremony at the Planalto Palace. “This is a neutral project. It won’t increase the country’s tax burden by a cent. What we’re doing is just making amends,” said Lula. “We’re talking about 141,000 people earning more than US$ 175,800 which will contribute to those earning less than US$ 1,000 not paying tax. Nobody will be poor as a result,” he added.
Lula also said he hopes that Congress’ changes will improve the bill. “When we send a bill to Congress, it becomes the owner of the bill and can make any changes they deem necessary. I hope that if it changes for the better, great. But never for the worse,” he said. “Now the cards are in the Planalto Palace and in the hands of Congress,” he said.
According to the Ministry of Finance, the measure will probably benefit 13.4 million formal workers – 32% of all formal workers in Brazil – in addition to the more than 10 million workers who already have tax exemption, and will have an impact of more than US$ 4,7 million on the economy. If the law is approved this year, the new rule will come into force in 2026, so workers will only be affected in 2027.
Brazil’s Minister of Institutional Relations, Gleisi Hoffmann, congratulated the Minister of Finance, Fernando Haddad, for his work on the bill and said she expects it to be processed quickly and with not many problems in Congress. “That’s about social justice and fiscal justice. It’s about getting the economy moving,” he said.
“We are sending a bill to Congress, a bill that fulfills a promise the president made. Many people said it was an unenforceable promise. But, today, we are here fulfilling the word of a statesman who seeks to achieve social justice,” said Haddad, explaining that the funds to cover the impact of the bill will come from taxing up to 10% on the income of people who earn more than US$ 175,800.
Now it’s up to Congress
Hugo Motta, the President of the Chamber of Deputies, praised the Executive’s initiative and pledged to be “loyal” to the president and the government in the assessment of the bill, adding that there will be changes to it.
“You’re proposing a very fair measure. And I am sure that the Chamber of Deputies will debate this matter, which is so important for the Brazilian people,” he said. “You will have our loyalty in the processing of this matter. And Congress, due to its diversity, will certainly make changes to improve the bill. We will try to give the matter the priority it needs,” he stated.
Federal deputy and leader of the Socialism and Freedom Party Talíria Petrone highlighted the bill’s importance for advancing tax justice in the country and predicted that it would be processed quickly and without resistance in Congress.
“I think it’s difficult for Congress to be against an issue that involves the daily lives of Brazilian workers, an issue supported by most parties. So I think it will be easily approved,” she said.
Fight for rights
Protests against high interest rates and pro-income tax exemption for those earning up to US$ 1,000 a month are taking place this Tuesday (18) in several cities across the country.
The protests took place on the first day of the Central Bank’s Monetary Policy Committee (Copom, in Portuguese) meeting on the country’s basic interest rate, called Selic.
The president of the Central Workers’ Union (CUT, in Portuguese), Sergio Nobre, stresses the importance of the general population taking part in these actions since high interest rates take resources away from production and are passed on to speculative activities.
“No company, of any size, from large to small, can make a real gain of 10%, as those who invest in securities that pay according to the Selic rate do. This means that the money doesn’t go towards investments and the construction of new factories and companies that create jobs and make the economy grow. The money circulates and reaches the hands of the worker,” he argues.
Adilson Araújo, president of the Brazilian Workers’ Central (CTB, in Portuguese), points out that high interest rates have direct consequences for the population. “The counterpart to these [high interest rates] is the sacrifice of government investment in health, education, security, science, technology, housing, sanitation and infrastructure. The logical and inevitable result is the advance of income concentration and social polarization,” he argues in an article published on CTB’s website.
With Leonardo Fernandes
