Why the Lula government is backing expanded tax breaks for churches

A House committee approved a bill to expand tax exemptions for churches, another move by the Luiz Inácio Lula da Silva administration to pander to Brazil’s evangelical Christian right. The bill is still to be voted on in the lower chamber of Congress before being sent to the Senate.

Churches already enjoy tax exemptions in Brazil. This latest bill, PEC 5/2023, seeks to expand them by granting tax immunity also for the goods and services needed for “the purchase of assets, the generation of income, and the provision of services” not directly related to religious practices, such as child care centers and nursing homes. 

The bill would also codify into law a Supreme Court ruling that church-owned real estate is exempt from municipal urban property tax (IPTU), even if it is leased to third parties, provided the income is used for the church’s “essential activities.”

An approved report on the bill written by Congressman Dr. Fernando Máximo specifies that churches will enjoy this new benefit through a rebate system. For example, churches will be able to order renovations and purchase building materials and later receive the spent taxes back.

The impact of the additional exemption on tax revenue is unclear. 

Congressman Gilberto Nascimento — who chaired the special committee that discussed the bill — said its author, Congressman Marcelo Crivella, discussed the issue with the Finance Ministry. The ministry told The Brazilian Report that revenue authorities would not comment on bills under discussion, and did not respond to a specific question about whether it had estimated the potential revenue loss from...