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In order to expand tax collection and make the new fiscal framework sustainable, the Ministry of Finance is preparing new initiatives.
Among the measures under analysis is a review of Individual Income Tax deductions and exemptions. The government aims to tax profits and dividends distributed by companies and to tax investment funds closed.
A source with knowledge of the matter said that the Income Tax agenda is “complicated” and therefore has not yet been publicly addressed. According to the same source, the objective is for these actions to come in a more structured way in the income tax reform.
Another initiative under analysis is the review of tax deductions for health expenses. The president Luiz Inácio Lula da Silva criticized this measure in December 2021, stating that “it is the poor who do not have a specialist, it is the poor who do not have a health plan (...) who are paying for the treatment we have”. The mechanism allows taxpayers to use proof of certain expenses, such as medical and educational expenses, to reduce the tax calculation base, which tends to benefit mainly people with higher incomes.
Income Tax deductions have been the subject of debate in several previous governments.
Former President's Management Jair Bolsonaro considered limiting medical deduction discounts, but the idea did not move forward. Another point that was under study and did not move forward was the possibility of extinguishing the standard 20% discount for taxpayers who make the simplified income tax return.
The government has already estimated the waiver of 51,1 billion reais with exempt income in the income tax of individuals, in addition to 31,3 billion reais with deductions for the 2024 fiscal year in the budget guidelines law.
In addition to these measures, the government is considering starting to charge periodic income tax.
Through the so-called quota-eater, exclusive investment funds, which today pay the tribute only at the time of redemption. To announce these measures, the secretary of the IRS, Robinson Barreirinhas, stated that the government was working on additional revenue measures, which were part of the government's policy of not creating or increasing taxes, but targeting those who are not paying, but should.
Former Economy Minister, Paulo Guedes, also tried to approve the taxation of dividends, but the Income Tax reform sent to Congress by the then head of the economic area ended up stalling.
O Ministry of Finance said it would not comment on these studied measures. The government has said that it will work on a reform of the IR after the consideration of a tax reform on consumption, which is being discussed in Congress.
