A bill in the Chamber of Deputies seeks to limit government increases in the IOF (Financial Operations Fund)

The controversy surrounding the Financial Transactions Tax (IOF), which makes credit more expensive for millions of Brazilians, promises repercussions in Congress. A bill presented to the Chamber of Deputies by the New Party (Partido Novo) aims to establish new maximum tax rate limits for various types of taxes and create legal barriers preventing the Executive from increasing them without consulting the Legislature.

The IOF (Tax on Financial Transactions) became a symbol of power struggle after Congress overturned the presidential decree that raised its rates in June. The government appealed to the Supreme Federal Court (STF), sparking constitutional debate: government supporters argue that the Constitution allows the Executive to change IOF rates by decree, while legal experts and the opposition argue that the decree exceeded legal limits because it was primarily intended to raise revenue, requiring approval by ordinary law.

The Supreme Federal Court, which ultimately validated the increase after a failed conciliation hearing on the 14th, not only helped the Treasury close the year's accounts but also legitimized the revenue-generating use of a tax that serves a regulatory function. At the same time, the possibility of retroactively charging IOF amounts during the period the decree was suspended intensified the debate over legal uncertainty.

With the bill, lawmakers are now seeking to define its scope and provide greater predictability to the business environment. "The proposal reinforces the regulatory function of the IOF and discourages its use as a short-term revenue-raising tool," explains Representative Marcel van Hattem (Novo-RS).

The bill, however, does not prevent its use "more vigorously" in exceptional contexts. "In such cases, the increase above the established limits may be implemented through specific legislation, preserving due legislative process and the constitutional principle of legality," the representatives emphasized in the bill's justification. This should avoid tax surprises that could impact companies, investors, and consumers.

IOF also affects the poorest

The IOF (Financial Operations Tax) directly impacts Brazilians' daily lives. "It applies to credit transactions, such as bank loans, overdrafts, and credit card installment payments," says Roberta de Amorim Dutra, who holds a master's degree in constitutional tax law from PUC-SP.

According to her, the tax is regressive in nature, meaning it weighs proportionally more heavily on those who earn less. "It hits those with lower incomes hardest, precisely those who depend most on credit. Money will become even more expensive for those already struggling."

Furthermore, IOF costs are expected to be passed on from companies to end consumers, increasing the price of products and services. "This will affect retail and the credit market in general," says Marcos Camilo, CEO of Pulse Capital.

He describes the cycle: "End consumers will have more difficulty financing retail products. Small business owners will have a very difficult time obtaining credit to finance their activities. In addition to interest rates already at very high levels, the IOF (Tax on Financial Transactions) will now be added to the cost of loans and financing."

Lucilene Prado, a partner at FM/Derraik and a tax law specialist, summarizes: "This isn't a tax on the richest, nor is it a tax on the upper classes. It's a tax that will affect everyone, substantially the poorest," she says.

Impact on everyday life and the long term

Tatiana Migiyama, Tax Management specialist at Fipecafi), carried out an exercise measuring the impact of the IOF increase on the daily lives of Brazilian taxpayers.

How does IOF affect individuals?

For individuals, installment payments on credit cards, loans, and overdrafts will be taxed at a rate of 0.0082% per day plus a fixed rate of 0.38%. According to the tax expert, this increases the cost of personal and revolving credit, reducing consumers' purchasing power and hindering access to credit in times of financial hardship.

What is the effect of the IOF increase on companies and entrepreneurs?

Companies face the same daily rate of 0.0082%, but with a 0.95% rate applied uniformly, regardless of the amount or term. This will increase the cost of working capital, especially in short-term transactions, and could directly increase the cost of goods and services to consumers.

Microenterprises and individual micro-entrepreneurs (MEIs) now benefit from a reduced tax rate of 0.00274% per day for transactions up to R$30,000. Despite the tax impact, this differentiated treatment maintains partial incentives for the formalization and growth of these businesses.

What is the situation for those who travel abroad or invest abroad?

For middle-income consumers, the impacts are direct: transactions such as international credit cards, withdrawals abroad, and currency exchange for travel, now taxed at 3.5%, increase the cost of travel and international purchases.

The same rate applies to personal or family remittances abroad, affecting Brazilians who maintain dependents outside the country or provide financial assistance to relatives abroad.

According to the tax expert, the loss is intangible, but undeniable: "The 3.5% tax on personal investments abroad, including remittances, discourages the international diversification of assets and makes financial planning strategies with assets outside Brazil more expensive."