The Minister of Finance, Fernando Haddad (PT)finally announced the main measures of the federal Executive’s spending cut package, which had been awaited with a mix of tension and expectation by the market.
According to the minister, .
In a 7-minute and 18-second speech on national TV, on Wednesday night (27), the head of the economic team announced the first measures of the fiscal package and also confirmed that the government will exempt Income Tax ( IR), from 2026, taxpayers who receive up to R$5,000 per month. Currently, those who earn up to R$2,259.20 per month are exempt.
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As a way of compensating for the increase in expenses due to the expansion of the exemption range, the government proposes the taxation of profits and dividends exceeding R$50,000 per month, which are currently exempt. Planalto’s estimate is that this taxation would fully compensate for the increase in spending with the expanded income tax exemption.
Watch an excerpt from Minister Fernando Haddad’s speech:
Read the full statement by Finance Minister, Fernando Haddad:
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“Dear Brazilians, dear Brazilians, good night!
In recent months, we have worked intensely to develop a set of proposals that reaffirm our commitment to a fairer and more efficient Brazil. This is not an isolated effort by President Lula’s government, but a joint construction, which seeks to guarantee lasting economic and social advances.
Today, we have clear signs that we are on the right path. Brazil not only made up for lost time and space, but also regained its prominent place in the world, among the ten largest economies. Now, we grow consistently, with a GDP of more than 3% per year.
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Unemployment, which punished our people in the previous period, placing millions of families below the poverty line, is today among the lowest in our history.
More families are returning to decent income and work. We guarantee real adjustments to the minimum wage and increase the Income Tax exemption range for those earning up to two salaries. Programs such as Minha Casa, Minha Vida and Farmácia Popular gained new momentum. And new programs such as Pé-de-Meia, Desenrola and Crédito arrived to combat school dropouts, help people regain credit and support those who want to undertake.
The fight against privileges and tax evasion allowed us to improve public accounts. If in the recent past, the lack of tax justice maintained privileges for the richest, without advances in income redistribution, now we collect in a more fair and efficient way.
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We comply with the law and correct misstatements. This was the case with the taxation of funds in tax havens and funds exclusive to the super-rich. But we know that major challenges remain. Given the external scenario, with armed conflicts and trade wars, we need to take even more care of our home. That’s why we are taking the necessary measures to protect our economy. In doing so, we will guarantee stability and efficiency and ensure that the advances made are protected and expanded.
We have already returned to workers the real gain in the minimum wage. This right, forgotten by the previous government, returned under President Lula. And with the new proposed rules, the minimum wage will continue to rise above inflation, sustainably and within the new fiscal rule.
To ensure that public policies reach those who really need them, we will improve the control mechanisms, which were dismantled in the previous period.
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Fraud and distortions delay service to those who need it most. For military retirements, we will promote more equality, with the establishment of a minimum age for the reserve and the limitation of pension transfers, in addition to other adjustments. These are fair and necessary changes.
To serve families who need it most, the salary bonus will be guaranteed to those earning up to R$2,640. This value will be adjusted for inflation in the coming years and will become permanent when it corresponds to one and a half minimum wages. The measures also combat privileges that are incompatible with the principle of equality.
We will correct excesses and ensure that all public agents are subject to the constitutional ceiling. Together with the Federal Supreme Court and the National Congress, we improved budget rules. The overall amount of parliamentary amendments will grow below the limit of fiscal rules. Furthermore, 50% of amendments from Congressional committees will necessarily go to public health, reinforcing the SUS.
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These measures I mentioned will generate savings of R$70 billion over the next two years and consolidate this government’s commitment to the country’s fiscal sustainability.
To guarantee the results we expect, in the event of a primary deficit, the creation, expansion or extension of tax benefits will be prohibited.
Fighting inflation, reducing the cost of public debt and having lower interest rates is a central part of our humanistic view of the economy. The Brazil of today is no longer the Brazil that closed its eyes to inequalities and the difficulties of our people. Those who earn more must contribute more, allowing us to invest in areas that transform people’s lives.
We therefore reaffirm our commitment to Brazilian families: protecting jobs, increasing purchasing power and ensuring the sustainable growth of the economy.
Exactly for this reason, today we also announce the biggest income reform in our history. Honoring the commitments made by President Lula, with the approval of the income reform, an important part of the middle class, which earns up to R$5,000 per month, will no longer pay Income Tax.
It’s a fair Brazil, with less taxes and more money in your pocket to invest in your small business, boost commerce in your neighborhood and help your city grow. The new measure will not have a fiscal impact, that is, it will not increase government spending. Because those with an income of more than R$50,000 per month will pay a little more. All without excess and respecting established international standards.
You know: this measure, combined with the historic tax reform, will result in a large part of the Brazilian people paying neither Income Tax nor taxes on basic food products, including meat. Correcting a large part of the unacceptable tax injustice, which deepened social inequality in our country.
Dear Brazilian men and women, the decisions we take, starting today, require courage, but we know that they are the right choices because they will guarantee a stronger, fairer and more balanced Brazil tomorrow.
Have faith that we will continue to build a country where everyone can prosper through their commitment and work. Know that President Lula’s government is a partner of each Brazilian family on this journey.
With an efficient government, we are building a stronger and fairer Brazil.
Thank you very much and good night.“
