The federal government studies send a complementary bill to compensate for possible revenue losses due to the expansion of the Income Tax (IR) exemption range. The measure was discussed this Tuesday (28) in rmeeting between the Minister of Finance, Fernando Haddad, and Senator Renan Calheiros (MDB-AL), rapporteur of the proposal in the Senate.
The text approved by the Chamber of Deputies at the beginning of October, it increases the IR exemption for those earning up to R$5,000 per month and reduces the rates for income up to R$7,350. Approved unanimously in the Chamber, the proposal, one of President Luiz Inácio Lula da Silva’s priorities, now is being processed in the Senate.
Divergent calculations
During the meeting, Haddad stated that the economic team considers the project “neutral from a fiscal point of view”, but acknowledged that new studies point to possible revenue losses. Independent Fiscal Institution (IFI) Calculations estimate a negative impact of R$1 billion per year, while the Senate Consultancy projects a waiver of up to R$4 billion per year.
“In the event of confirmation of a deficit slightly larger than what the Treasury estimates, of R$1 billion or R$2 billion, the Senate can contribute by approving a complementary project so as not to put fiscal neutrality at risk,” said Haddad after the meeting lasting just over an hour.
The minister highlighted that the technical team will “redo the calculations” and present the results to Renan Calheiros by this Wednesday (29). “We were very careful to guarantee fiscal neutrality. Even so, we will compare the numbers with the Revenue for a definitive conference”, stated Haddad.
Scenarios under discussion
Renan Calheiros declared that he evaluates five possible paths for processing the proposal in the Senate: approval of the text as it came from the Chamber, inclusion of editorial amendments, deletion of sections, dismemberment of the proposal or presentation of a complementary project.
“I will opt for one of these scenarios, concerned above all with the rapid sanction by the President of the Republic of this matter, which is the most important one being processed in the National Congress”, stated the senator in a press conference.
According to the rapporteur, the priority is to ensure that the text goes directly to presidential sanctionwithout the need to return to the Chamber. Changes of merit could require a new analysis by deputies, which the government wants to avoid to accelerate the entry into force of the new bands on January 1, 2026.
Tax neutrality
The proposal envisages compensating for lost revenue with taxation on profits and dividends, in addition to creating a minimum income tax rate of up to 10% on income exceeding R$600,000 annually. Even so, technicians from the Senate and IFI point out that these measures may not be sufficient to cover the fiscal impact.
Haddad reinforced that the Treasury’s commitment is to maintain the balance of public accounts. “We want the Senate to consider the project shortly. If adjustments are necessary, we will do so responsibly, to preserve fiscal neutrality”, he declared.
Voting calendar
Renan informed that this week he will discuss with the president of the Senate, Davi Alcolumbre (União Brasil-AP), and party leaders whether the opinion will be presented in the next few days or just next week, when the sessions will be held in person again.
“I’m going to talk to the president and the leaders to decide whether we vote this week or leave it until next week. The important thing is to guarantee the quick and safe approval of the matter”, said the senator.
Palácio do Planalto considers the IR reform to be one of the government’s main economic projects. The economic team estimates that around 15 million Brazilians will stop paying the tax or will have a reduction in the amount withheld at source, if the proposal is sanctioned by the end of the year. For this to happen, however, the text needs to be approved in 2025.
