President Luiz Inácio Lula da Silva of Brazil issued two legislative documents on Monday that introduce new taxes on exclusive funds (commonly known as “funds of the super-rich”) and on offshore investments made by Brazilians.
The former is a provisional decree outlining taxes ranging from 15 percent to 20 percent on exclusive funds, to be levied twice a year. This type of fund often has a single shareholder and a minimum investment of BRL 10 million (USD 2 million). The Brazilian government expects to collect BRL 24 billion in extra revenue over the next three years through the new tax.
As it is a provisional decree, it takes effect as law immediately, though it requires approval by Congress within 120 days.
The second legislative document signed by Lula is a bill foreseeing the progressive taxation of offshore investments, ranging from between zero and 22.5 percent. Current laws only charge tax on the amount invested abroad once it returns to Brazil.
The proposal faces some resistance among lawmakers, which is why it has been kept separate from the exclusive funds tax.
The decree and bill were submitted during a ceremony in which Lula ratified increases to the minimum wage and income tax threshold, approved by Congress on Friday. The president claims he wants to “include underprivileged Brazilians in the budget” and raise taxes on the “super-rich.”
The initiatives aim to stimulate the economy during a period when it is grappling with a challenging scenario characterized by the world’s highest real interest rates, increasing debt and default rates, along with elevated unemployment.
A significant tax reform is currently underway in Congress with the goal of reducing the overall tax burden. The reform has been approved by the House and is currently under consideration in the Senate.
The intention is to offset reduced taxes on the middle and lower classes, by implementing new taxes on millionaires.
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