Government considers slicing tax reform to pay Brazil Aid of R$ 600

The Jair Bolsonaro government is considering slicing up the tax reform to be able to fund a BRL 600 Brazil Aid for next year.

The idea, studied by the political and economic teams if the president is re-elected, is to separate the proposed income tax taxation on profits and dividends from the rest of the tax reform.

The calculation made is that, with a rate of 15%, it would be possible to raise BRL 69 billion, of which BRL 52 billion would allow an increase in the social benefit from BRL 400 to BRL 600.

The plan is that, with the surplus of R$ 17 billion, it would be possible to increase the exemption range of the Individual Income Tax to R$ 2,500, a level defended by the economic team.

The tax reform project was approved in the Chamber of Deputies, but ended up stalled in the Federal Senate. Currently, shareholders of Brazilian companies are exempt from taxation of profits and dividends.

With the link between taxation of profits and dividends and the increase in Auxílio Brasil, the federal government’s strategy is to pressure the productive segment to support the tax reform, which includes a reduction from 15% to 8% in the Corporate Income Tax.

Debt

The federal government also estimates that, this year, it will be possible to reduce the gross debt to 76.6% of GDP (Gross Domestic Product). The last forecast made by the economic team is that the percentage would be 77.6%.

The reduction, according to federal government sources, is due to the forecast that, soon, the TCU (Union Court of Auditors) will authorize the return of R$100 billion from the National Bank for Economic and Social Development (BNDES) to the National Treasury .

The amount would allow a 1% decrease in the relationship between public debt and economic activity, allowing the current administration to return to a level close to the beginning of the current administration.