Tax waiver rises to R$31 billion with changes to Income Tax approved by the Chamber

Changes made by Federal Representative Arthur Lira (PP-AL) to the final text of the Income Tax exemption for those earning up to R$5,000 per month increased the government's tax waiver to R$31.25 billion, more than R$5 billion higher than the initial estimate. The proposal was unanimously approved last Wednesday night (1st) by the Chamber of Deputies and now goes to the Senate.

According to a study by the Chamber's legislative consultancy, the granting of a progressive discount for incomes up to R$7,350, expanded in July, caused the tax waiver to increase to R$31.2 billion in 2026 (if sanctioned this year), R$33.5 billion in 2027 and R$35.9 billion in 2028. Lira also included changes to guarantee exemption on the distribution of profits and dividends until 2028 and meet the demands of agribusiness.

The basis for calculating the new tax was also changed, with the removal of income obtained from financial instruments in the sector and resources invested in Prouni considered as tax paid by companies.

To offset the tax break, the bill creates a 10% minimum income tax for high-income taxpayers and maintains income tax withholding on dividend remittances abroad. Official estimates point to revenues of R$34.1 billion in 2026 from these measures.

The estimate, however, is not yet finalized and depends on the analysis of technicians from the Ministry of Finance after publication of the official text approved by the Chamber.

Members of the economic team believe the proposal maintains fiscal balance and is budget neutral. Minister Fernando Haddad believes the budgetary impact will be neutral.

"This project doesn't just seek tax justice, but it seeks tax justice with fiscal balance. In other words, it's anchored in fiscal balance," he told reporters.

The expansion of the exemption is expected to benefit up to 16 million taxpayers in 2026, according to Lira's projection. The minimum tax will be levied on those earning more than R$50,000 per month and will be mandatory for incomes exceeding R$1.2 million per year.

The bill received unanimous support, with 493 votes in favor, including from allies and the opposition. The approval was considered historic by the Chamber of Deputies. However, the exemption for those earning up to R$5,000 will only be effective in 2026 and is subject to final approval by the Senate.

"I believe it was a great goal for the National Congress, and we won't have any problems in the Senate, judging by what the Senate has already voted on," the minister added.