Lula Government Considers Creating a Minimum Tax for Millionaires in Brazil

The idea is to use the tax to fund the increase in the income tax exemption threshold to $896

Oct.10.2024 1:11PM

Adriana Fernandes

Brasilia
The Ministry of Finance is studying the creation of a minimum tax for individuals to ensure effective taxation of millionaire incomes in Brazil.

The debate on the topic is being conducted discreetly within the team of Minister Fernando Haddad as a potential countermeasure to fund the increase of the IRPF (Personal Income Tax) exemption threshold to R$5,000 ($896).

Adjusting the tax table is a campaign promise of President Lula. The current exemption value is two minimum wages (R$2,824). The minimum tax on millionaire individuals would have a rate to be defined between 12% and 15% of income.

The collection system would work as follows: the minimum tax applied to the individual's total income, such as financial gains, salary, profits, and dividends, is compared to what the person effectively paid under the current system. If the result is lower, the taxpayer would have to pay the difference in the IRPF adjustment.

This would be an alternative way to tax exempt incomes of the very wealthy in Brazil, including profits and dividends distributed to company shareholders, which are not subject to Income Tax. In Brazil, the higher the individual's income, the lower the tendency to pay taxes. This is known as the regressivity of the Brazilian tax system.

https://www1.folha.uol.com.br/internacional/en/business/2024/10/lula-government-considers-creating-a-minimum-tax-for-millionaires-in-brazil.shtml