The leader of the PT in the Chamber of Deputies, Odair Cunha (PT-MG), stated on Wednesday night (27) that the increase in income tax exemption for those earning up to R$5,000 should only last until 2025. This is one of the income reform measures that is part of the spending cut package, which had the general guidelines presented by Minister Fernando Haddad, of Finance.
According to him, this increase in exemption will have no fiscal impact on the government and will be compensated with an increase in taxation for those earning more than R$50,000. However, the proposal still needs to pass through Congress.
“The income reform will be presented this year for a debate that will be held throughout 2025 and voted on in 2025,” said the deputy. In total, the government projects to save R$30 billion in 2025 and R$40 billion in 2026.
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See Haddad’s full statement on the spending cut package
Haddad and ministers Simone Tebet (Planning) and Rui Costa (Civil House) will present the details of the package this Thursday morning (28), explaining this and other measures. There are still doubts as to how this exemption will actually be forwarded to Congress.
A meeting between Haddad and congressional party leaders is also scheduled for this Thursday (28) to present the proposals for the spending cut package and try to convince them to move forward with the process.
The package had been heavily demanded by the financial market and was stuck especially in the last three weeks, with intense negotiations between the Treasury, President Luiz Inácio Lula da Silva (PT) and ministers mainly in the social area, who even threatened dismissal if they were affected .
Financial market analysts point out that the impact of the measures will depend heavily on approval in Congress and the government’s firmness in implementation. There is a risk that the proposals will be dehydrated during legislative negotiations, which could generate more pressure on the financial market.
Another assessment is that the market will look for clear signs of the government’s commitment to fiscal adjustment. Measures such as prohibiting the expansion of tax benefits in the event of a primary deficit were seen as positive, but not sufficient to broadly restore credibility.
See what was announced in the package that provides for spending cuts
Adjustment of the minimum wage
The minister announced that the minimum wage will be readjusted in a “sustainable” way. This means a limited real gain of between 0.6% and 2.5%, according to the expenditure growth range of the fiscal framework. Currently, the rule considers the adjustment for inflation and the increase in GDP from two previous years.
IR exemption
The Income Tax exemption range, currently at R$2,824.00 per month, will be increased to R$5,000.00. According to Warren Investimentos, the change will cost at least R$45.8 billion. “This calculation is optimistic, it is worth saying, as it considers that the Income Tax table would be modified, guaranteeing that the benefit would only be focused on lower-income taxpayers”, stated Felipe Salto, chief economist at the consultancy.
Taxing the super rich
As a form of compensation, the minister announced an increase in Income Tax for those earning more than R$50,000 per month, but did not reveal the exact percentage. “Everything without excess and respecting established international standards”, highlighted the minister.
Benefits of the military
Although without detailing the measures, the minister confirmed that there will be changes to the Armed Forces’ paid reserve. One of the changes may include setting a minimum age of 55 for soldiers to enter the paid reserve. Currently, the only criterion is length of service, at least 35 years, with no minimum age requirement. The charging of a 3.5% contribution to the military health fund is also being studied.
“To ensure that public policies reach those who really need them, we will improve the control mechanisms, which were dismantled in the previous period. Fraud and distortions delay service to those who need it most. Regarding military retirements, we will promote more equality, with the establishment of a minimum reserve age and the limitation of pension transfers, in addition to other adjustments. These are fair and necessary changes”, stated the minister.
Fight against super wages
The government expressed support for limiting so-called “super salaries” in the civil service. A bill that addresses the issue has been under analysis in the Senate for three years. The estimate is that the measure could generate savings of R$3 billion to R$4 billion per year. However, Movimento Livres’ calculation questions this savings potential. According to the think tankthe proposal allows 32 “penduricalhos” to continue to be paid to employees without being subject to the constitutional ceiling.
