Economy

Income tax in Brazil: past, present, and future

Income tax in Brazil: past, present, and future
Will the next president revamp Brazil’s income tax? Photo: lovelyday12/Shutterstock

We are living in what are probably the most politically polarized times in Brazilian history. Arguments about the elections are tearing families apart and having a negative effect on people’s mental health. It is hard to agree on anything. But there might be one issue that unites us all: taxes.

In general, Brazilians believe they pay too many taxes. Especially when you factor in what citizens get in return in the form of public services. One of the main villains is income tax, the champion in generating revenue for the state since 1979. Born in 1922, Brazil’s income tax law was approved by Congress and stated that all citizens and companies should pay a yearly amount related to any kind of revenue. It was implemented in 1924, including only one article and eight paragraphs. It was not the first time Brazil taxed income, but previously there was not an institution that took care exclusively of this kind of tax. From then on, there would be.

Emperor Pedro II had already outlined a law that created this form of taxation. The imperial economy, based on slavery and dominated by elites, had a very small universe of possible taxpayers, seeing as few people had any source of income. Also, Brazil was (and still is) a large country, which made it hard to implement such a complex form of taxation. It was only in the Old Republic that it would become institutionalized. The Constituent Assembly of 1891 had discussed the matter but ended up not creating the income tax.

One of the most vocal defenders of the need for a tax based on what citizens and companies receive was Ruy Barbosa (1849-1923), the first Minister of Finance of the republican period. He even wrote a 38-page report about...

Don't miss this opportunity!

Interested in staying updated on Brazil and Latin America? Subscribe to start receiving our reports now!