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Sindifisco Study Reveals That Workers With Average Salaries May Pay Effective Income Tax Rates Higher Than Millionaires, Exposing Distortions Caused By Exempt Income And The Unequal Taxation Between Capital And Labor.
Workers with a monthly income starting at R$ 6 thousand already bear a higher income tax burden than millionaires in the country.
The conclusion is from the National Union of Federal Revenue Auditors (Sindifisco), which analyzed the declarations of IRPF 2024 related to the calendar year 2023.
According to the survey, the effective rate for the very wealthy was 5.28%, while the peak taxation for salaried workers reached 11.40% among those earning between 15 and 20 minimum wages.
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The discrepancy appears when observing the income brackets. Those earning between 5 and 7 minimum wages recorded an effective rate of 6.63%. Subsequently, the tax increases until it reaches its peak between R$ 19.8 thousand and R$ 26.4 thousand per month, with 11.40%.
Among millionaires, the average effective burden decreases to 5.28%, a level lower than that faced by a large part of the salaried middle class.
The study also shows that at the base of the pyramid, taxation is lower but rises quickly. Between 1 and 5 minimum wages, the effective rates varied from 0.61% to 3.59%.
From R$ 6 thousand, however, the tax weighs more than among filers who concentrate wealth and capital income.
In summary, those who depend on salaries tend to contribute proportionally more than those who concentrate income in exempt sources.
Exempt Income Expands Inequality In Taxation
For Sindifisco, the key lies in the relationship between total income and exempt and non-taxable income. As income grows, so does the share not reached by the IRPF.
Among taxpayers with earnings above 240 minimum wages per month — equivalent to about R$ 316.8 thousand — the exempt portion reaches 71% of the total declared, about R$ 224,928 monthly free of tax in that range.
In the lower brackets, the behavior is the opposite. In some lower income segments, only 5% of what is received remains exempt, limiting the space for deductions and increasing the effective proportion of tax on salaries.
The result is a system that burdens labor income more than capital income.
Profits And Dividends Drive Disparity
The president of Sindifisco, Dão Real Pereira dos Santos, attributes part of this disparity to the increase of exempt profits and dividends in the income composition of the wealthiest.
According to him, this category gained weight in the declarations and reinforced the mismatch between salaried workers and capital holders.
From the analyzed data, 35% of all declared income in the IRPF 2024 corresponded to exempt and non-taxable income, of which about 35% were profits and dividends received.
In monetary terms, the total of profits and dividends exceeded R$ 700 billion in 2023, an increase of approximately 14% compared to 2022, when it was R$ 614.9 billion.
For Santos, this movement is associated with tax planning strategies that shift compensation from labor to profit distribution, reducing the incidence of income tax on the wealthiest.
Pejotização And Legislative Effects
In the union’s assessment, the law that exempted profits and dividends stimulated the so-called “pejotização”.
Professionals who previously received salaries began to operate as legal entities to be compensated through distributed profits — income that, by current rules, is not taxed in the IRPF.
“This change in the law, which exempted profits and dividends, also initiated the process we call ‘pejotização’, that is, workers being converted into legal entities precisely to receive exempt profits instead of taxed salaries,” says Santos.
For him, the result is a less progressive system. “We increasingly see tax planning that expands exempt income and burdens lower incomes,” he adds.
The union’s diagnosis also indicates that 94% of filers have an income of up to 20 minimum wages — up to R$ 26.4 thousand monthly — a group responsible for 52% of the total declared.
The 6% remaining, with income above this level, concentrate the 48% remaining and, above all, most of the exempt shares.
Tax Reform And Perspectives
The tax reform in Brazil advanced at the end of 2023 with the approval of the constitutional amendment, but implementation will occur gradually.
In July of this year, the Chamber of Deputies approved the first stage of regulation, focused on consumption taxation.
Changes are expected to be implemented in stages and be fully in effect by 2033. The second phase, which addresses income taxation, is still under discussion.
At the end of August, deputies approved urgency for the project that expands the IR exemption for those earning up to R$ 5 thousand.
The proposal fulfills a campaign promise of President Luiz Inácio Lula da Silva (PT) and integrates the government’s strategy to relieve the burden on the base of the pyramid, while also discussing the taxation of profits and dividends and the creation of a minimum rate on high income.
Santos evaluates that this set of measures may reduce the current distortion but does not eliminate the problem.
“This government project should relieve those earning up to R$ 5 thousand. But this is still a partial correction of the problem and will need to be revisited,” he says.
In his view, a broader adjustment involves revoking the exemption on profits and dividends and correcting the income tax table, which would allow alleviating the burden on salaried individuals and, eventually, reducing the indirect taxation on consumption.
Challenges To Make The System More Progressive
The union emphasizes that the discussion about income is back on the agenda with ongoing regulation, but does not end with short-term measures.
For the entity, it is necessary to calibrate the system to restore progressivity, bringing the contribution of the very wealthy closer to that observed among salaried individuals.
“In 2026, practically the tax discussion will end. This is a first step, but can never be considered a definitive step,” says Santos.
As the process advances in Congress, the current situation remains: the salaried middle class bears, on average, a higher effective rate than the one applied to the super-rich, mainly due to the weight of exempt income at the top of the pyramid.
This structure, according to the study’s authors, helps explain why the peak of taxation falls on salaries between R$ 19.8 thousand and R$ 26.4 thousand, while the effective rate for millionaires is almost half that value.
With this scenario, the question that frames the debate is straightforward: Will taxing profits and dividends and expanding exemptions for the base be enough to restore progressivity, or will the country need to more profoundly redesign income and consumption taxation?
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