© Reuters. President Luiz Inácio Lula da Silva 01/27/2023 REUTERS/Ueslei Marcelino
BRASILIA (Reuters) – President Luiz Inacio Lula da Silva’s government is considering increasing the Income Tax exemption for workers earning up to two minimum wages this year, two sources with knowledge of the negotiations said on Saturday.
The idea, still under evaluation, is to at least partially fulfill one of Lula’s campaign promises, to raise the exemption for workers who earn up to 5,000 reais, increasing the disposable income of those who earn less in the country, said the sources under the condition of anonymity.
A broader exemption, however, would represent a much larger revenue waiver as the economic team seeks to reduce the expected strong primary deficit for 2023 and signal fiscal discipline.
As Reuters reported on Friday, the government is also considering raising the minimum wage to 1,320 reais from May.
So the exemption, if decided, would apply to workers who earn up to 2,640 reais a month.
Workers who currently earn up to 1,903.98 per month do not pay Income Tax, an amount that has not been updated since 2015, implying, in practice, an increase in the tax burden on Brazilians with lower wages.
The information on the measure under study was initially released by the newspapers Folha de S.Paulo and Estado de S. Paulo.
(Reporting by Marcela Ayres)