Brazilian lawmakers have approved President Lula da Silva's landmark initiative to exempt the middle class from income tax, reports BFMTV. The plan is to compensate for lost income by quadrupling taxes for the rich.
According to the adopted bill, those whose monthly salary does not exceed 5,000 reais (approximately EUR 800) will be completely exempt from income tax. Previously, only citizens with incomes of up to 3,000 reais (approximately 480 EUR) were exempt from paying the tax.
According to the government, if the initiative is fully implemented, approximately 16 million Brazilians will no longer pay this tax by 2026.
To cover budget losses, taxes will be quadrupled for those earning more than 50,000 Brazilian reais per month (approximately 7,995 EUR). Currently, approximately 140,000 people in this category pay an average income tax of 2.5%. For them, the rate will gradually increase to 10%.
This initiative, which forms the basis of support for President Lula, was negatively received by financial markets last year and even led to a historic decline in the national currency, the real.