Brazil is considering a review of tax incentives to offset the costs of expanding the income tax exemption threshold. Congressman Arthur Lira, rapporteur for the proposal, stated that a linear reduction in tax breaks is being considered to support President Lula's campaign promise to exempt those earning up to R$ 5,000 per month.
Lira noted that Brazil has nearly R$ 600 billion in tax exemptions, the returns of which are not fully known. The possibility of a linear reduction in these exemptions is being technically studied to ensure fair compensation without raising direct tax burdens.
Alternatives, such as increased rates for higher earners or changes in dividend taxation, are also being explored. However, the focus remains on reviewing tax waivers, with a diagnosis suggesting an R$ 8 billion surplus between current revenue and the cost of the exemption.
Public hearings are planned for the coming weeks, with a preliminary text expected by June 27. Lira aims for broad discussion before a plenary vote to ensure the reform is not more complicated than the current system.