President Luiz Inácio Lula da Silva stated, on Sunday night (30), that Brazil’s inequality is the lowest in history. On radio and television, he spoke to the population about the Income Tax exemption for those earning up to R$5,000 and the increase in taxation for high incomes. Both measures will be valid from January.
The sanction took place last Wednesday (26)in Brasilia. Tonight’s statement gives more publicity to the fulfillment of one of the main objectives defined in the 2022 campaign.
In his speech, which lasted approximately six minutes, he also mentioned the creation of the programs nest egg, Light of the People and People’s Gasamong other measures taken by your government.
“Thanks to these and other policies, inequality in Brazil is today the lowest in history. Even so, Brazil continues to be one of the most unequal countries in the world. The richest 1% accumulates 63% of the country’s wealth, while the poorest half of the population holds only 2% of the wealth”, he said.
“The change in Income Tax is a decisive step towards changing this reality, but it is only the first. We want the Brazilian population to have the right to the wealth they produce, with the sweat of their work. We will remain firm fighting the privileges of the few, to defend the rights and opportunities of the many”, he added.
Economy
Lula showed calculations so that those benefiting from the measure have a more real idea of how much they can save by not paying more Income Tax. “With zero income tax, a person with a salary of 4800 can save 4 thousand in one year. It’s almost a fourteenth salary.”
Lula recalled that compensation for the State coffers will come from the taxation of the super-richof people who earn “twenty, one hundred times more than 99% of the Brazilian people”. There will be 140,000 super-rich people included in the 10% income tax charge.
According to him, the extra money in the hands of beneficiaries should inject R$28 billion into the economy.
IR table
The new law does not, however, make a correction to the IR table. What’s new is just the application of the exemption and discounts for these new income ranges. So, anyone earning more than R$7,350 will continue to pay 27.5% Income Tax.
An eventual correction of the entire table would cost more than R$100 billion per year, according to government calculations.
Since 2023, the government has guaranteed exemption from Income Tax for those earning up to two minimum wages, but this only benefits the lower range of the table. In total, the table has five rates: zero, 7.5%, 15%, 22.5% and 27.5%.
Richest
To compensate for the loss of revenue, the text provides for an extra progressive rate of up to 10% for those who receive more than R$600 thousand per year (R$50 thousand per month)around 140 thousand taxpayers. For those who already pay 10% or more, nothing changes.
Today, high-income individual taxpayers collect, on average, an effective income tax rate of 2.5% on their total income, including distribution of profits and dividends. Meanwhile, workers in general pay, on average, 9% to 11% in income tax on their earnings.
Some types of income do not enter this account, such as capital gains, inheritances, donations, income received accumulated, in addition to exempt investments, savings, retirement due to serious illness and compensation. The law also defines limits to prevent the sum of taxes paid by the company and the taxpayer from exceeding percentages set for financial and non-financial companies. If this occurs, there will be a refund in the annual declaration.
