Bolsonaro talks about correcting the IR table ‘in high percentage’, but economic team sees restrictions

The economic team intends to announce a correction of the IR (Income Tax) table of the individual in a “very high percentage”, said President Jair Bolsonaro in an interview with CNN Brasil, but the Ministry of Economy sees difficulties in implementing the measure, according to two folder sources.

“We have been pursuing the issue of Income Tax since the beginning, the table that is not readjusted, and he (Paulo Guedes) intends to announce for next year a very high percentage of IR discount, from 2,000 to close to 3,000 o discount”, said the president in an interview given on Saturday (16), not making it clear whether this discount would be the new exemption range.

Despite Bolsonaro’s statement, two sources from the Ministry of Economy said that there is still no definition on a possible correction of the IR table and that the initiative will only be implemented if the government finds a margin in the accounts.

According to one of the officials involved in the assessment, who spoke to Reuters on a reserve basis, the correction will be made “depending on the pace of revenue growth” and in a way that “obeys fiscal targets.”

The source says that it is necessary to keep up with the pace of collection growth and do everything very sparingly.

In 2021, the government proposed the correction of the table within the IR reform project, which ended up locked in Congress and did not get off the ground.

When it presented the proposal, which would correct the tax bands and increase the tax exemption limit from R$1,900 per month to R$2,500 per month, the Ministry of Economy estimated that the measure would cost at least R$22 billion. per year.

According to the second source, the 2023 Budget Guidelines Bill, sent to Congress last week, does not provide for any reservation for the correction of the IR table to be made. Therefore, the adoption of the measure would depend on the verification of an increase in the collection.

Since last year, the government has been recording record tax revenues amid the resumption of activity. Despite this, part of these gains has already been consumed with the cut of other taxes, such as the PIS/Cofins exemption for fuels, the general 25% cut in the IPI (Tax on Industrialized Products) and Import Tax reductions.

The linear correction of the Income Tax table does not require tax compensation, but this loss of revenue ends up impacting the primary result. For 2023, the government proposed a deficit target of BRL 65.9 billion.