The reduction for amounts between R$5,000 and R$7,350.00 should cause an increase in disposable income for a large part of the Brazilian population and favor retail companies. The project approved by the Senate now depends on sanction by President Luiz Inácio Lula da Silva, scheduled to take place after COP30, and will come into force from January 2026.
According to M4 Intelligence, between 17.9 million and 20.9 million workers should benefit from the end of the discount or the smaller discount and will have more money – around R$27 billion, according to the government’s tax waiver estimate – to spend in 2026, reinforcing the annual increase in the minimum wage.
The question is: where will this extra value go? Danniela Eiger, head of Retail at XP, expects a positive impact for retail given an increase in the population’s income. “This normally happens when there are benefits or other measures, and low-income consumers tend to direct part of this gain towards immediate consumption, which should benefit retail companies”, he explains.
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Debts and basic consumption
However, the ultimate fate of this increased income is uncertain, Eiger points out. The tendency is for much of it to be used to deal with the population’s high debt or destined for more basic categories of consumption, such as food, due to the restriction of families’ current purchasing power.
This restriction is clear in the recent behavior of low-income consumers, who have opted for cheaper products or substitutes, reinforcing the search for essential items.
Durables depend more on interest
Although there is potential for a positive impact on other consumer categories, especially discretionary ones, such as clothing and electronics, the effect should be more limited, believes Danniela.
Durable products, as they require a higher value, depend more on credit conditions and interest rates, in addition to marginal income. And the reduction in interest rates next year, even starting at the beginning of the year, is expected to be slow. “Therefore, the main expected impact of the exemption on retail is on lower value basic or discretionary consumer goods”, he summarizes.
More help for meat
The extra income can also be turned into barbecue and benefit the meat sector. In 2026, as it is an election year, there is a historical tendency to increase disposable income and encourage consumption, especially of proteins, says Leonardo Alencar, head of Agro, Food and Beverages at XP. “Even without the additional stimulus of tax exemption, the scenario is positive, as there is traditionally a correlation between an election year and growth in the consumption of these products,” he says.
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According to him, the income tax exemption reinforces the positive scenario expected for the sector next year. “The Brazilian protein market is facing a favorable scenario for next year, with expectations of continued high prices, sustained domestic consumption and strong exports”, he explains.
Slaughterhouses should benefit especially from export performance and better margins, with the chicken and pork segment emerging as a highlight. There may be slight cost pressure especially linked to grains, but still favorable for the chicken and pork segments. In the case of cattle, the current high supply tends to decrease in 2026, which could generate upward pressure on cattle prices, although perhaps less pronounced than expected.
The Lion comes out, the Tiger comes in
In addition to family debt, there is another strong competitor for retailers in the fight for resources freed up by the exemption: online games. In the last 12 months, around 40 million consumers paid for at least one bet or online game, according to a study by the National Confederation of Retail Managers and the Credit Protection Service. Of these, 41% gave up some type of consumption to bet.
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This month, the Consumer Sector Index, B3, accumulates an increase of 2.97% and 27.53% in the year, following the general increase in the market, which led the Bovespa Index to gain 1.69% in November and 27.36% in the year.
