IOF Battle Timeline: Understand discussion between Executive, Congress and STF

Minister Alexandre de Moraes of the Federal Supreme Court (STF) decided on Wednesday (17) to maintain almost fully the decree of the federal government that raised the IOF (tax on financial operations) rates.

The only exception was the revocation of taxation on operations known as “drawee risk”, a model used mainly in retail to anticipate payments to suppliers via bank.

The decision occurs after weeks of impasse between executive and National Congress, which culminated in an attempted conciliation in the Supreme Court, but without agreement.

Read more:

Moraes had temporarily suspended the government’s decrees and the congressional legislative decree annulled the measures, marking a conciliation hearing on July 15.

With the lack of consensus, the minister revoked the suspension and confirmed the decision of the Congress, ending the increase in IOF about the drawn risk.

IOF BATTLE TIME LINE:

• May 2025: Government proposes an increase in IOF, providing for extra collection of R $ 20.5 billion by 2025 and R $ 41 billion in 2026.
• Resistance in the congress: Economic team reduces the proposal, estimating collection of $ 10 billion by 2025 and $ 30 billion in 2026.
• Other measures: Government suggests taxing income tax exempt financial securities such as LCIs and LCAs, but faces resistance.
• June 25: Congress approves annulment of the presidential decree that increased the IOF, with a large majority in the House and symbolic vote in the Senate.
• June 30: Mayor Hugo Motta argues to overthrow and criticize political polarization.
• July 1st: Union Attorney General (AGU) filed a lawsuit in the STF to reverse Congress decision, alleging violation of the separation of powers.
• July 2: President Lula defends judicialization of the case, stating that without appeal in the judiciary no longer governs.
• July 5: Moraes temporarily suspends effects of the decision of Congress and calls for mediation between executive and legislature.
• July 16: Moraes revokes suspension, confirms a decision of the congress and concludes IOF increase on the drawee risk.

The increase in IOF was proposed to balance the public accounts and comply with the rules of the tax framework, with greater impact on the richest, according to the government.

Opposition criticizes the measure, arguing that fiscal adjustment must come from expenditure cuts and that the tax would increase the production cost in the country.

Economists point out that Congress has hindered fiscal adjustment by maintaining tax benefits that reduced the collection, such as payroll and emergency programs for specific sectors.

For experts, measures such as reducing parliamentary amendments would be more effective for the balance of public accounts.