The Lula government starts 2026 with tougher rules to limit tax spending. The tightening, however, displeases the engines of the Brazilian economy: for agribusiness and industry, tax incentives need to be reevaluated, but on an individual basis.
As part of the economic team’s effort to close public accounts in an election year, Complementary Law 224, of 2025, increases taxation on bets and financial institutions.
The change in legislation affects taxes such as PIS/Pasep, Cofins, Corporate Income Tax, CSLL (Social Contribution on Net Profit), IPI (Tax on Industrialized Products), Import Tax and the employer’s social security contribution.
With the rules approved by the National Congress, JCP (Interest on Own Capital) — a form of remuneration paid by companies to partners — will now be taxed at 17.5% Income Tax at source.
According to the director of Economics at CNI (National Confederation of Industry), Mário Sérgio Telles, the tightening will bring . Among the predicted consequences, the entity cites damage to technological innovation and regional development in the North and Northeast.
CNI calculations indicate that of the total tax incentives that the complementary law should reduce, around R$9.3 billion — 47% — will fall on the industry.
Data from the entity, based on the PLOA 2026 Tax Expenditure Statement from the Federal Revenue, indicate that tax benefits aimed at the sector should reach R$50.9 billion — around 8.3% of the total — this year.
In Telles’ assessment, there is a contradiction between the new fiscal rules and the government’s industrial policy, Nova Indústria Brasil.
“This is nonsense. The government, for three years, has been developing a new industrial policy called Nova Indústria Brasil, in which one of the focuses is to encourage innovation so that the industry increasingly uses cutting-edge technology. At the same time, this project reduces tax incentives for companies to innovate”, he explains.
The industry also projects a reduction in the attractiveness of the regions of Sudam (Superintendence for the Development of the Amazon) and Sudene (Superintendency for the Development of the Northeast) with the tightening of tax benefits.
“There are countless companies we spoke to that say they are in the North and Northeast precisely because of these incentives. Reducing this type of incentive goes against a better distribution of growth and economic development across the national territory”, he states.
The text approved by the National Congress. Therefore, the reduction of incentives will not achieve constitutional immunities. In this way, the tax benefits granted to companies in Simples Nacional and the Manaus Free Zone continue to be maintained.
Although he sees the maintenance of incentives for the Manaus Free Trade Zone as positive, the advisor of Cieam (Amazonas State Industry Center) Jeanete Portela believes that industrialists in the region should feel, in a residual way, the impact of the measure.
According to him, there is concern that the new legislation will worsen the economic situation of the industrial sector, which is already facing a loss of competitiveness.
“We will not feel the direct impact because of this exception, but we will have some residual impact because the Manaus Free Trade Zone has a very relevant volume of acquisitions from other markets and other regions.”
Impact on food
The CNA (Brazilian Agriculture and Livestock Confederation) projects impacts on food prices and the IPCA (Broad National Consumer Price Index), the official inflation index.
The entity estimates that agribusiness will have received around R$74.3 billion in tax incentives in 2024.
Of this total, around 58% were granted to the basic food basket exemption. In addition to the impact on the population’s cost of living, the CNA also predicts a reduction in the competitiveness of Brazilian products abroad and an increase in production costs for rural producers.
The coordinator of the CNA Economic Center, Renato Conchon, explains that around 13.5% of the tax benefits allocated to the sector went to the export of rural production. This is the second most important item in agribusiness relief, behind only the basic food basket.
“As is the case in the main producing countries in the world, no country exports taxes. Brazil should not do so either, so as not to erode the competitiveness of its products on the international market”, he says.
In 2024, CNA calculations project that the sector will receive R$6.3 billion in exemptions related to agricultural inputs, such as fertilizers, pesticides and seeds. The amount is equivalent to 8.5% of the total benefits recorded by agribusiness in the period.
“This exemption on inputs exists mainly to avoid the corrosion of increased production costs for rural producers and also to reduce tax cumulativeness, one of the major problems of the current tax system, which was addressed in the text of the tax reform”, states Conchon.
The CNA calculates that Brazilians should start to feel the effect on prices within 60 days, from the sanction of the law. The tightening of benefits was sanctioned by President Luiz Inácio Lula da Silva (PT) in December.
Spending continues to rise
Despite the fiscal tightening, the Federal Revenue projects a 12.56% increase in the amount of tax expenditure in 2026. Last year, data from the DGT (Tax Expenditure Statement) estimates that the volume reached R$544.47 billion, in the most restricted cut.
But the Tax Authority itself states that the value may be underestimated, since data from DIRBI (Declaration of Incentives, Renunciations, Benefits and Immunities of a Tax Nature) are generated from information provided by companies and do not include information on tax expenses representative of Simples Nacional, for example.
For this year, a survey by the Brazilian Tax System Observatory, carried out at the request of the CNN Brazil based on official data from the Federal Revenue Service, it projects that tax expenditure will rise to R$612.84 billion.
The Executive and Legislative Powers estimate that the new rules should have a positive impact of R$20 billion on public accounts this year. The economic team has the resources to reach the 2026 fiscal target, which foresees a surplus of 0.25% of GDP, that is, R$34.3 billion.
