Brazil’s government eyes raising income tax exemption in 2023

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The idea, which is still under review, is to at least partially fulfill one of Lula’s campaign promises – to further raise the exemption to cover workers earning the equivalent of 5,000 reais, a move to increase the disposable income of those who earn less in the country, the sources said anonymously.

The information about the measure was reported for the first time by the newspapers Folha de S. Paulo and O Estado de S. Paulo.

While it could reduce income inequality, a wider exemption would reduce tax revenue at a time when the economic team seeks to reduce the large primary deficit expected for 2023 and signals fiscal discipline.

As Reuters reported on Friday, the government is also considering raising the minimum wage to 1,320 reais from May.

This means that the exemption, if decided, will apply to workers who earn up to 2,640 reais per month.

Workers who currently earn up to 1,903.98 per month do not pay income tax, a figure that has not been updated since 2015, implying, in practice, an increase in the tax burden on Brazilians with lower wages.

($1 = 5.1522 reais)

(Reporting by Marcela Ayres; editing by Diane Craft)

By Marcela Ayres

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