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After the Fall of the MP of IOF, the Planalto Studies to Reduce Billion-Dollar Tax Incentives, Protect Social Programs, and Tax the Rich Without Raising Taxes.
A fiscal turnaround is underway in Brasília. With the defeat of the MP of IOF in Congress, the Lula government is preparing a bold plan to replenish public funds and balance the accounts without burdening the taxpayer. According to the Ministry of Finance, the strategy targets the cut of tax waivers amounting to about US$ 800 billion per year, much of it concentrated in large companies and privileged sectors.
New Fiscal Strategy Replaces the MP of IOF
After strong pressure from banks, billionaires, and the betting sector, the MP that increased the IOF on financial transactions was rejected in October 2025. Since then, the team of Minister Fernando Haddad has been working to replace the measure with an equivalent impactful action, without creating new taxes.
The central idea, according to sources from the Ministry of Finance, is to eliminate exemptions without criteria and protect what has a social function, such as programs aimed at low-income populations. The new plan is expected to be formalized in the PLP 182/2025, which provides for a linear reduction of tax incentives and creates rules for joint liability for banks and platforms operating with unauthorized betting.
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Subcommittee of the CFT Defines Three Groups of Incentives
The preliminary report from the Subcommittee on Tax Exemptions, which will be voted on on October 15, organizes tax expenditures into three groups: those that should be preserved, reevaluated, or extinguished.
Among those preserved are the basic basket, the Minha Casa Minha Vida, and non-profit entities. However, sectors with low economic return — such as agribusiness, fuel, and the automotive sector — will be reevaluated. In addition, Simples Nacional and the Free Trade Zone of Manaus will also undergo a review of criteria and performance goals.
Expected Impacts and Fiscal Timeline Until 2029
The report anticipates an initial cut of 10% in tax waivers, capable of generating US$ 80 billion more in revenue, enough to compensate for the loss with the MP of IOF. According to Constitutional Amendment 109/2021, the government needs to gradually reduce incentives until they reach 2% of GDP by 2029.
Thus, the Planalto seeks to balance the budget without raising taxes, prioritizing tax efficiency and transparency — two central pillars of the new fiscal strategy.
Evaluation Council and Public Transparency
To monitor the changes, the government will create the Council for the Evaluation of Tax Expenditures, with representatives from the Federal Revenue, TCU, IPEA, and civil society. In addition, a public dashboard detailing beneficiaries and costs of each incentive will be launched, strengthening social control.
With this, the CFT should send the report to the Commission on Constitution and Justice (CCJ) still in October 2025, paving the way for the processing of the new framework for tax waivers.
Political Dispute and Scenario in Congress
The proposal reignites the clash between the government and the Centrão, which led the rejection of the MP of IOF. Still, the Planalto tries to turn the defeat into a political turnaround, presenting the cut in waivers as a structural fiscal response.
As stated by Deputy Rogério Correia (PT-MG), president of the CFT, “the government will continue taxing the rich, without touching social programs”. He also suggested that the Planalto may review non-mandatory parliamentary amendments, depending on the approval of President Lula, who returns from an international trip in the week of October 20, 2025.
Path to a Fairer Tax Policy
Public finance experts believe that cutting tax waivers could mark a new chapter of tax justice in the country. After all, reducing tax privileges of concentrated sectors and directing resources to education, health, and housing can strengthen the State and expand social investment.
However, analysts warn: success will depend on solid political agreement and total transparency in the execution of the plan. The government’s challenge is to balance fiscal responsibility with social protection, in a scenario of intense disputes in Congress.
And you, what do you think? Should the government expedite the cut of tax waivers to replenish the budget or adopt a more gradual and negotiated review with Congress? Leave your opinion in the comments!
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