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The Government Returns to Increasing Taxes to Try to Balance the Public Accounts in 2026. The Provisional Measure 1,303, Now in Force, Raises Taxation on Companies, Online Bets, Fintechs, and Even Exempt Investments. The Proposal, However, Faces Strong Resistance from Productive Sectors and Needs to Pass Through Congress by October.
The federal government presented, in June, the Provisional Measure (PM) 1,303. It increases a series of taxes to bolster revenue and close the public accounts for 2026, an election year.
According to information from G1, the measure, which faces resistance from productive sectors, is already in force but needs to be approved by the Congress by October to avoid losing validity.
According to the Ministry of Finance, the resources are essential to support the fiscal target. The forecast is for an increase of R$ 21 billion in revenue next year.
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Fiscal Target in Dispute
The Minister of Finance, Fernando Haddad, announced that the budget proposal for 2026, to be sent on August 30, already incorporates the effects of the PM.
The official target is a surplus of 0.25% of GDP, about R$ 31 billion. Analysts, however, consider the target difficult, as it will require strict spending control in an election year.
If the provisional measure is overturned, either totally or partially, the government will have to redo the math to compensate for revenue losses.
History of Tax Increases
In 2024, the government already relied on taxing exclusive funds, “offshores,” and changes in state subsidies.
It also maintained the increase in taxes on fuels, resumed the confidence vote in Carf, and limited the payment of precatórios.
These actions helped close the accounts in previous years. Now, the goal is to repeat the formula to support the fiscal framework.
Other Measures Under Review
In addition to the PM, the economic team is also counting on the approval of PEC 66, which changes rules regarding precatórios.
The change could open space for R$ 12.4 billion in the 2026 budget, as it adjusts the spending limit according to inflation.
The government wants to use this space for mandatory expenses, such as maternity pay.
The National Treasury admitted at the end of July that additional revenue efforts may be necessary. In recent years, the government also relied on state dividends and oil auctions to bolster revenue.
Reaction from the Productive Sector
Business entities reacted strongly to the PM. The National Confederation of Industry (CNI) claims that the increase in IR on interest on own capital (JCP) will reduce investments.
It also criticizes the taxation of incentivized securities, such as LCI, LCA, and debentures, and warns about the legal uncertainty caused by changes in tax compensation rules.
According to the entity, Brazil already has a high tax burden of 32.3% of GDP, against a regional average of 21.4% in Latin America.
Febraban, which represents banks, said it understands the need for fiscal balance but considers the increase in taxes a poor solution for the real economy.
It advocates for the topic to be widely debated in Congress.
Abdib, an association of infrastructure companies, warns of the risks of ending incentives on infrastructure debentures and Development Credit Letters.
The Association of Bets and Fantasy Sports (ABFS) also criticized the measure. It claims that the increase in the tax burden on online betting undermines the operations of legalized companies and favors the parallel market.
According to the entity, this will reduce jobs and investments, as well as decrease revenue in the medium term.
Abrasca, which represents publicly traded companies listed on the B3, assessed that the tax increase on JCP discourages the capital market.
It also criticizes the limitation on the use of tax credits, as it may increase the indebtedness of companies.
What the MP 1,303 Provides
The provisional measure includes a set of actions. Among the main ones are:
- Online Bets: The rate increases from 12% to 18% on net revenue (GGR). Haddad argues that the sector has a gross profit of R$ 40 billion per year. The expectation is to collect R$ 1.7 billion in 2026.
- Interest on Own Capital: Taxation increases from 15% to 20%, with the potential to generate an additional R$ 5 billion.
- Incentivized Securities: LCI and LCA will be taxed at 5%. The government says the exemption costs R$ 41 billion per year and expects to collect R$ 2.6 billion in 2026.
- Financial Investments: Unification of the income tax rate at 17.5%. Currently, it varies between 15% and 22.5%. The measure does not generate fiscal impact.
- Cryptoassets: Gains will be taxed at 17.5%. The government did not disclose a revenue estimate.
- Fintechs and Cooperatives: Rates increase from 9% to up to 20%, depending on size. The expectation is to collect R$ 1.6 billion.
- Tax Compensations: New rules to curb abuses are expected to yield R$ 10 billion in 2026.
- Education: The Pé de Meia program, aimed at keeping students in high school, will now be part of the constitutional investment floor. This opens up R$ 12 billion in the budget but reduces available resources for other areas of education.
The Challenge for Congress
The government is counting on the approval of the PM by early October.
Otherwise, it loses validity and leaves a hole in the accounts.
The challenge is significant, as criticisms from the productive sector have gained support from lawmakers concerned about the economic impact of the measures.
Minister Haddad insists that the additional revenue is essential to meet the fiscal framework. Without it, he argues, the country will face even greater spending restrictions in 2026.
The opposition, in turn, accuses the government of raising taxes without addressing the problem of public spending.
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