Minister of Finance explains that benefit will be funded by taxation of the richest 1% of the population, ‘breaking with a history of fiscal adjustments that penalized the poorest’
The Minister of Finance, celebrated the sanction of the law that zeroes the (IR) for those who earn up to R$5 thousand per month. During the speech, Haddad defined the measure as a “rescue of politics with dignity” and emphasized that the change in the IR table represents a reversal in the logic of fiscal adjustments in Brazil: for the first time, the balance of public accounts will not be made at the expense of the low-income population.
In a didactic way, the minister explained the financial engineering that allowed the fulfillment of the campaign promise, considered by many to be unfeasible. The exemption will not imply an increase in the general tax burden, but rather a redistribution of responsibilities.
To pay for the benefit — which will also offer reduced rates for those earning between R$5,000 and R$7,350 —, the government will start taxing sectors that previously enjoyed almost total exemption. According to data presented by Haddad, around 140,000 people with incomes exceeding R$100,000 per month (which corresponds to 1% of the population) will pay an average tax rate of 10%. Previously, the average paid by this group was just 2.5%.
Haddad made a historic counterpoint by criticizing the traditional model for cleaning up public accounts in . The minister recalled that, in past decades, seeking fiscal balance was synonymous with “giving the population goosebumps”, as the measures invariably punished workers by freezing the minimum wage, civil servants’ salaries and the Income Tax table itself.
“This time, we decided to do it differently,” stated the minister. The new model focuses on cutting tax spending (tax exemptions) for companies that no longer need state aid, putting an end to what he called the “Bolsa Empresário”.
Inequality in focus
The speech also addressed Brazil’s profound social inequality. Haddad highlighted that, although part of society desires European or North American standards of living, income distribution in Brazil is worse than that of 47 of the 54 countries on the African continent.
The minister reinforced that reducing inequality — measured by the Gini index, which should reach its best historical level — does not mean taking away space from those who already have it, but rather expanding opportunities. He drew a parallel with the creation of university quotas, remembering that inclusion was achieved through the expansion of places, not exclusion.
Political articulation and economic scenario
The approval of the project, which occurred unanimously in the National Congress, was cited as an example of the country’s unity around “great causes”. Haddad thanked the commitment of the presidents of the Chamber, Hugo Motta, and the Senate, Davi Alcolumbre, essential for the measure to be sanctioned in 2025 and come into force in January of next year.
The head of Finance ended his speech projecting an optimistic economic scenario for the end of President Lula’s term, citing the delivery of the lowest inflation and the lowest unemployment in the last four years, in addition to positive primary results in public accounts expected for next year.
