A study by the Brazilian Ministry of Finance suggests implementing a minimum income tax (IRPFM) on high earners to fund reductions in the Individual Income Tax (IRPF) for lower-income individuals.
The proposal targets the top 0.2% of taxpayers, those earning over R$50,000 monthly (R$600,000 annually). The tax rate would progressively increase, reaching 10% for incomes starting from R$1.2 million per month.
The government believes this 'minimum tax' on the wealthiest would enable the reduction of IRPF for 14.5% of the population. This would include full exemption for those earning up to R$5,000 per month and partial exemption for those earning between R$5,000 and R$7,000.
The Ministry of Finance views the comprehensive reform, as proposed in Bill No. 1.087, as crucial for a fairer tax system and reducing income inequality in Brazil. The study analyzed different scenarios, concluding that combining tax exemptions with the minimum tax would reduce inequality.
The study indicates that without the minimum tax, the benefits of income tax cuts would not be sustainable and could worsen income inequality. The proposed measures aim to increase the progressivity of the tax system and reduce the Gini coefficient, a measure of income inequality.