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Government announces income tax exemption for salaries up to R$5, financed by higher taxation of high incomes. Proposal is part of tax reform and seeks to correct historical inequalities without impacting public accounts.
A measure that promises to change the game for millions of Brazilians was announced by Finance Minister Fernando Haddad in a recent speech.
The speech, broadcast nationwide, brought news that many had been waiting for: a proposal that could ease the burden on the lower and middle classes, as well as correct historical distortions in Brazil's tax distribution.
But there is an important detail that can go unnoticed. The change comes with an adjustment that affects a specific group.
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Who will benefit? Who will foot the bill? Check out the details of this proposal that is already stirring up economic and political debate.
What changes in income tax
According to Minister Fernando Haddad, the proposal aims to exempt all Brazilians who earn up to R$5 per month from Income Tax (IR).
This measure is part of the second stage of tax reform, which now focuses on Income Tax.
According to Haddad, this historic decision will be financed with a higher tax on those who earn more than R$50 per month.
In their words, “those with higher incomes will pay a little more.” The government assures that the change will be made without negatively impacting public finances, in compliance with international standards.
How will the measure be financed?
The big question for many experts and citizens is how sustainable this change will be. Haddad guaranteed that the exemption for salaries of up to R$5 will be financed without generating a fiscal deficit.
The account will be closed thanks to the creation of an additional rate for taxpayers with income above R$50 per month.
This balance, according to him, will also be achieved through a package of mandatory spending cuts, announced together with the tax proposal.
“There will be no increase in government spending. Everything will be done responsibly and within established international standards,” said the minister.
A broader reform
This proposal is just one piece of the puzzle that makes up the tax reform currently underway. Haddad took advantage of his speech to point out that the first stage of the reform, which deals with consumption taxation, was approved last year and is currently being regulated by the National Congress.
He highlighted that the consumption reform will bring additional benefits to the lower and middle classes, such as exemption from taxes about basic basket products.
“Combined with the historic tax reform, a large part of the Brazilian people will not pay income tax, nor taxes on essential items such as meat,” he said.
Combating social inequality
For the minister, this change is more than a tax adjustment; it is a significant step towards social justice.
He stated that the new tax structure will correct distortions that deepened inequality in the country.
“We are eliminating the unacceptable tax injustice that especially affects the middle class and the poorest,” declared Haddad.
He also highlighted that the measure will encourage consumption and investment in small businesses, benefiting the local and national economy.
Repercussions and expectations
The proposal has already started to generate reactions in the market and in society. Experts point out that the measure could reduce the tax burden for millions of Brazilians, but the challenges for its implementation are still great.
According to Agency Brazil, the real impact will depend on how the National Congress approves the proposed changes.
Furthermore, fiscal compensation mechanisms will be closely monitored to ensure that budget balance targets are met.
President Luiz Inácio Lula da Silva also spoke out on the issue, reiterating that tax reform is a priority for his government. He stated that “it is unacceptable that the burden of taxes falls on those who can least afford it.”
What to expect?
The proposal still needs to be approved by the National Congress before it can come into effect. Until then, intense discussions are expected to take place between parliamentarians, economists and representatives of civil society.
The idea of taxing those with higher incomes more is already common in developed countries, but its application in Brazil may face resistance.
Is this the chance to correct historical distortions in tax collection and put Brazil on a fairer path?
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