BRASILIA (Reuters) -Brazil’s finance minister said on Monday he believes the country’s income tax exemption proposal will not cost the government as much as initially forecast.
Minister Fernando Haddad told journalists in Brasilia on Monday that the projected cost of President Luiz Inacio Lula da Silva’s proposal is 27 billion reais ($4.75 billion) per year, lower than a prior estimate of 35 billion reais.
Haddad said the figure was recalculated taking into account a correction of this year’s tax table.
Lula’s government unveiled a proposal late last year to increase the level of earnings exempted from income taxes for those earning from 2,824 reais a month - or twice the minimum wage - to 5,000 reais per month as of 2026.
The proposal, which must still be sent to Congress, led local markets to a sell-off in the final weeks of 2024, when it was announced alongside a package of expense-cutting proposals.
The minimum wage increased this year to 1,518 reais from 1,412 reais, and the government intends to maintain the income tax exemption for those earning up to two times the minimum wage in 2025 before the new 5,000-real threshold would take effect in 2026.
Haddad has previously said that the fiscal impact of the higher tax exemption would be fully neutralized by compensatory measures, including raising taxes on the wealthiest.
The minister added on Monday that President Lula will meet Senate and lower house chiefs on Tuesday to discuss the exemption proposal, which is expected to be sent to lawmakers that same day.
($1 = 5.6886 reais)