Good morning! The tax reform progresses in Congress, but at what cost? September 7 protests are seen as a do-or-die moment for the government. New jobs, but stagnant wages.
The House’s tax reform will shrink public revenue
Brazil’s House has sent the income tax reform proposal to the Senate, after analyzing all amendment requests. The bill — hastily discussed and approved by the lower house — has been bashed by productive sectors and tax experts alike for not correcting the system’s existing distortions (even enhancing some of them), as well as reducing tax revenue for governments which are already strapped for cash.
- Changes also displeased investors, and the stock market crashed 2.28 percent on Thursday.
Why it matters. According to one estimate, the tax reform would reduce the revenue of states, municipalities, and the federal government by BRL 41.1 billion (USD 7.9 billion) per year.
Core points:
- Tax brackets. One of the key changes concerns raising the income tax exemption threshold from BRL 1,903 to 2,500. Other brackets will be raised by an average of 13 percent.
- Dividends. Corporate dividends will no longer be tax-free. But lawmakers reduced the rate proposed by the Economy Ministry from 20 to 15 percent....