The second round is approaching, and much has been said about the plans of presidential candidates Jair Messias Bolsonaro (“Bolsonaro”) and Luiz Inácio Lula da Silva (“Lula”) on tax matters.
In both plans, questions about tax reform and tax simplification are addressed, however, none of the candidates expressly mentions the taxation of dividends.
In the plan of the current president and candidate Bolsonaro, the reduction and simplification of taxes paid by companies and the reduction of the tax burden of the worker stands out.
The former president and candidate Lula presents the intention to tax the “super-wealth” to relieve the poorest, as well as to revoke the spending ceiling. However, there is no express mention to the inclusion of the Wealth Tax, issue commonly raised by parties that have a bias towards the left.
Please find below a brief table with the tax proposals of Lula and Bolsonaro:
Bolsonaro “Among the structuring reforms, in order to guarantee employment and income and the resumption of economic growth, simplify legislation and reduce the tax burden, continue with advances in labor legislation to facilitate hiring, reduce bureaucracy and deregulate the rules to favor the creation of companies and entrepreneurship, continue with trade liberalization, with the reduction of taxation of national companies and also of import taxes, creating an environment of competition and competitiveness that will reduce prices and improve the offer and quality of products and services, benefiting the citizen.”
Lula “We will propose a solidary, fair and sustainable tax reform, which simplifies taxes and in which the poor pay less and the rich pay more. This reform will be built from the perspective of development, “simplifying” and reducing consumption taxation, correcting tax injustice by guaranteeing tax progressivity, preserving the financing of the welfare state, restoring the federative balance, contemplating the transition to an economy ecologically sustainable and improving taxation on international trade, progressively releasing products with higher added value and embedded technology. We also want to correct a mechanism that historically transfers income from the poorest strata to the highest income strata of society: tax evasion.”
Bolsonaro “The Federal Government strives for legal certainty, through the consolidation and implementation of legal frameworks that guarantee the fulfillment of obligations in economic and commercial relations. In the same way, the Federal Government has helped to reduce and simplify taxes, such as import taxes (II), on industrialized products (IPI) and on the circulation of goods and services (ICMS), which provides a margin of slack for the entrepreneur.”
Lula “Creation of a simpler and more progressive tax structure.”
Bolsonaro “As part of the tax reform, within the exemption commitments assumed for the 2019-2022 management and the principles of fiscal responsibility, a proposal was prepared to correct the 31% of the Income Tax (IR) table for Individuals, exempting all CLT workers who received up to R$ 2,500 per month. For this, in July 2021, the text was sent to the National Congress and was even approved by the Chamber of Deputies, but did not advance in the Senate. The re-elected government of Jair Bolsonaro will continue to pursue the implementation of this proposal and the expansion of the exemption for workers. Without the pandemic and with economic growth, with fiscal responsibility, it will be possible to pursue the objective of exempting workers who receive up to five minimum wages during the 2023-2026 administration.”
Lula N/a
Bolsonaro: N/a
Lula “Putting the poor and workers back on the budget, through the repeal of the spending cap and review of the current Brazilian fiscal regime.”
“We are going to make the very rich pay income tax, using the funds collected to invest intelligently in programs and projects with a high capacity to induce growth, promote equality and generate productivity gains.”
Bolsonaro: https://divulgacandcontas.tse.jus.br/candidaturas/oficial/2022/BR/BR/544/candidatos/908966/5_1660093698051.pdf
Lula: https://divulgacandcontas.tse.jus.br/candidaturas/oficial/2022/BR/BR/544/candidatos/893498/5_1659820284477.pdf
Regardless of the elected candidate, it is possible to notice that discussions and changes in the tax scope are to come. However, it is important to highlight the importance of the national Congress, which is an indispensable part of the process, since almost all tax changes must be processed in the Federal Senate and Chamber of Deputies for voting and approval.
Another point that should also be remembered is the complexity of the approval and voting procedure for bills that aim to change tax issues, as they must go through debates and adjustments until they reach the vote and subsequent implementation.
Finally, in the proposed projects it is possible to clearly identify the intentions and objectives, however, in most cases it is not mentioned how such results will be achieved.
