By Jamie McGeever and Gabriel Ponte
BRASILIA, Jun 25 (.) – Brazil’s government on Friday unveiled the second phase of its broader tax reform, in which it aims to cut income tax on up to 30 million workers, cut income tax corporate profits and increase levies on financial market activity.
Brazil’s tax system is considered one of the most complex in the world, and the government insists that simplifying it and reducing the overall tax burden is crucial to fostering investment and economic growth in a sustainable way in the long term.
“Thirty million salaried workers in Brazil will pay less income tax because, for the first time, we are taxing capital gains,” Economy Minister Paulo Guedes told reporters after delivering the proposals to the leader of the Chamber come down, Arthur Lira.
“This is just the beginning. This shows a new direction. If taxes have been going up for the last 40 years, they will start to fall now,” Guedes said, adding that the number of people exempted from paying any income tax will will double to 16 million.
Lira also emphasized that the overall tax burden will not increase and said he is confident that Congress will pass the tax reform this year.
Guedes said income tax cuts for individuals will be funded by higher capital gains taxes.
In a presentation released by the Ministry of Economy, the government proposed a 20% income tax, with a monthly exemption of 20,000 reais.
Internal Revenue Service officials estimate that the change will boost tax coffers by around 18.5 billion reais next year, rising to 54.9 billion reais in 2023 and up to 58.2 billion reais in 2024.
The proposal also includes a 15% tax on all stock transactions that will be calculated quarterly instead of monthly, as is currently the case.
(1 dollar = 4.93 reais)
(Reporting by Jamie McGeever, Ricardo Brito, Isabel Versiani and Gabriel Ponte. Edited in Spanish by Rodrigo Charme)