Income tax lagged takes R$149 billion from the population in 2022

The lag in the IRPF (Individual Income Tax) table will make the Federal Revenue Service charge the population R$ 149 billion next year above what would be due if the numbers were fully readjusted for inflation since 1996.

It was in the second year of the Fernando Henrique Cardoso (PSDB) government that the annual update was no longer carried out. Unafisco (National Association of Tax Auditors of the Federal Revenue), author of the survey, calculates that it is necessary to correct the table from that year onwards.

The lag in the table will affect, in 2022, in particular 15.1 million people with lower income. This portion of the population could be exempt from taxation if the salary range had been updated.

As of the tucana administration, the correction started to be made in an inconstant manner, as in 2002 and, in the PT governments, between 2005 and 2015 —the last year in which there was a readjustment.

The lag accumulated throughout the period exceeds 130% across the table, according to Unafisco.

President Jair Bolsonaro (PL) promised during the campaign to raise the exemption range to R$5,000. However, he later said that it would not be possible to apply it.

The table has not been corrected once in the current administration. Wanted, the Ministry of Economy did not take a stand.

This situation penalizes more those who earn less, according to Unafisco. “Those with lower income will pay a tax that they shouldn’t be paying,” said Mauro Silva, president of the organization.

Today, for example, the personal income tax table grants exemption to those who earn up to R$1,903.98 per month. This range covers 9.1 million people, according to the auditors.

If the correction advocated by Unafisco was applied, the exempt salary range would rise to R$ 4,469.02, an increase of 134%. The measure would exempt 24.2 million taxpayers.

Tathiane Piscitelli, professor of public finance and taxation at the FGV (Fundação Getulio Vargas), stated that the IR table is very outdated, which, according to her, particularly affects the lower classes.

“The table does not reflect the economic capacity of taxpayers, and this is a problem especially for the poorest population, because during this period in which there was no correction, there was inflation and a currency lag,” said Piscitelli.

“This causes the net salary and the availability of resources to be reduced. So this one [correção] it would be an important measure to generate tax justice,” he said.

The lack of correction hurts other classes as well.

Today, for example, whoever earns more than R$ 4,664.69 must pay the maximum rate of 27.5% on all the amount that exceeds this salary. With the correction, only those earning above R$ 10,948.96.

Piscitelli, however, sees the need for even more profound changes in the table so that the poorest pay less in taxes and the richest pay more. This logic meets the principle of progressivity.

Thus, the teacher defends rates higher than the current ceiling of 27.5% on the highest salaries.

“We should consider creating higher rates for high incomes, to give some degree of progressivity, which is a constitutional demand that is hampered by the fact that we have exemption from dividends,” he said.

Unafisco’s calculation of the lag is made after the government’s project that would change the Income Tax was blocked in the Senate.

The proposal contains the correction of the table. However, due to various resistances, the rapporteur, senator Angelo Coronel (PSD-BA), announced that the text will be archived.

Even in the project, the correction proposed by the government would be below the level defended by Unafisco. The text approved by the Chamber and abandoned by the senators had readjustments ranging from 13.2% to 31.3%, depending on the salary range.

The bill would also take a step towards higher class taxation by implementing dividend taxation. This is part of the company’s profit transferred to the owners or shareholders.

However, this point received different flexibility, such as those that benefited micro and small companies, companies that distribute dividends within an economic group and other changes.

In the view of Silva, from Unafisco, the final version of the project had as its only positive point the correction of the individual’s table. “Even the part of the taxation of dividends [que seria benéfica] it had so many exceptions that it would maintain much of the injustices of today,” he said.

With the text presumed dead, Senator Angelo Coronel said he plans to present a separate proposal to correct the table.

The congressman stated that he can still present the project this year, but the most likely is that the text does not have time to be discussed in 2021 and will remain until 2022.

“I’ve already talked to the president [do Senado, Rodrigo] Pacheco [(PSD-MG)]. Most likely, it will only be appreciated next year. Even so, if approved, [a correção] it would be valid for the whole year,” said the senator.

​He criticized the lack of correction of the table. However, he added that he would not make a correction in the levels defended by Unafisco, considering them high.

According to what has been discussed, the project should provide for an increase in exemption by 68%, to R$ 3,200. The move would more than double the number of exempt, to 18.6 million. In the other ranges, the correction would be around 13%.

The government’s proposal for the reform of the Income Tax would increase the exemption to R$ 2,500.

The government can also correct the table through an MP (provisional measure), which has immediate legal force. However, the text would need to be approved by Congress within 120 days — otherwise, it would expire.

The Executive has already signaled this possibility on a few occasions. Angelo Coronel said he would not mind a correction made by the government. “If it’s to benefit the population, there’s no problem.”