Bolsonaro will send 2023 Budget without IR correction, but with fuel subsidy

President Jair Bolsonaro (PL) will send the 2023 Budget proposal providing for the maintenance of the exemption of federal taxes on fuel, at a cost of approximately R$ 50 billion, according to government sources heard by the Ministry of Health. Sheet.

The readjustment of the IRPF table (Individual Income Tax), an electoral promise made by Bolsonaro in 2018, not fulfilled and now renewed by the president, was left out of the budget piece to be sent by the Executive at the end of the month.

There will also be no reserve of funds to guarantee the continuity of the additional R$ 200 for Auxílio Brasil. The maintenance of the minimum benefit of R$ 600 has been signaled both by Bolsonaro and by former president Luiz Inácio Lula da Silva (PT), who leads polls of voting intentions.

Held by legal restrictions that prevent the inclusion of part of his promises in the budget piece, the president will seek to circumvent the unfavorable situation with the speech that he will build a solution with Congress soon after the elections.

There is fear among the president’s aides that the lack of resources to honor the promises is a point politically exploited by opponents during the campaign. Technically, however, the Executive is obliged to follow the legal frameworks in force, such as the spending ceiling (a rule that prevents expenses from growing above inflation).

The calculations for sending the Budget were discussed at a meeting this Thursday (4th) of the JEO (Budget Execution Board), formed by ministers Ciro Nogueira (Casa Civil) and Paulo Guedes (Economy).

According to technicians heard by the report, the maintenance of the exemption on fuel was decided by the ministers and will apply to both diesel and gasoline. Both items would be free of federal taxes by the end of this year.

Bolsonaro opted for the exemption for fearing the impact of the sharp rise in fuel prices on his chances of reelection. The president is in second place in the voting intention polls.

There was controversy around the topic, given that the tax cut ends up encouraging the consumption of more polluting fossil fuels. On the other hand, there is an assessment that the measure contributed to reducing the price of pumps and containing inflation.

The inclusion of the exemption in the Budget also throws any eventual decision to raise taxes again in Lula’s lap, in case the PT wins the elections and wants to rebuild federal revenues.

In the case of the correction of the IRPF table, the Federal Revenue has already prepared a range of scenarios with more than one hundred combinations of changes. The salary ranges used to apply the Income Tax discount have been frozen since 2015 – which, in practice, means a higher tax burden for families. Any change, on the other hand, will mean loss of revenue for the Union.

The deficit forecast by the government at the moment is close to the limit of R$ 65.9 billion authorized by the LDO (Budget Guidelines Law) of 2023.

The impact of correcting the table, in turn, can be smaller or larger depending on the model chosen. The simulations indicate that the effect on the collection can be small, of R$ 6 billion, or much more significant, of up to R$ 94 billion. Members of the economic team have defended the provision of compensation, such as limiting medical expenses that can be deducted from the IR for those who submit the statement using the complete model.

In terms of expenses, the government defined the inclusion, in the budget proposal, of a reserve of R$ 11.5 billion for the granting of readjustments to the federal civil service. This amount is within the spending ceiling.

There is still no decision on the format of the adjustment, but government sources say that the increases may be selective, that is, for some careers. as showed the Sheetthe government is studying using the inflation forecast for 2023 as a reference for the readjustments, given that it will be lower than this year’s.

About a million civil servants have their salaries frozen since 2017. Other categories, with higher salaries, had the last adjustment in 2019. This year, Bolsonaro tried to contemplate only police officers, but the movement triggered reactions from other careers and the president gave up. of bounty.

The continuation of the additional R$ 200 to families from Auxílio Brasil would have a cost of R$ 52 billion, an amount that does not fit in the Budget under the current rules.

The budget for the program must be set at R$ 106 billion, enough to guarantee a minimum of R$ 400 for the beneficiaries, including those that were recently included, after the PEC (proposed amendment to the Constitution) of the benefits. The government included about 2.2 million families in August, according to Caixa.

The inclusion now of the full allocation for the payment of R$ 600 to families would end up making the operation of the public machine unfeasible, as it would result in the compression of discretionary expenses (which include investments and current expenses).

The government’s political strategy is to indicate the possibility of sending a message amending the Budget in October or November, after the elections, including the expenses promised by Bolsonaro.

Although the matter is considered delicate, behind the scenes there is recognition that the promise to keep Auxílio Brasil at R$ 600 may end up leading to some discussion of softening the spending ceiling.

The president himself has already expressed his desire to review the expense limitation rule.

“Last year, we had an excess of revenue, more revenue, in the region of R$ 300 billion. You cannot use a penny of that in the infrastructure given the constitutional amendment of the ceiling back there. something will be changed. We will leave it for the future, [para] after the elections to discuss this issue,” he said in a radio interview in April.

More recently, Bolsonaro stated that maintaining the Auxílio Brasil of R$600 requires the approval of a new PEC, although he did not detail its content. The spending cap is a rule provided for in the Constitution.

Lula, in turn, has already publicly defended the tearing down of the roof. “There will be no spending cap in my government. Not that I will be irresponsible, spend to indebted the nation’s future. It will have to spend on what is necessary,” she said.

However, there is a warning, both within the government and in the financial market, that it would be important for any change in the ceiling to be accompanied by measures to review less efficient expenditures.