Haddad: 20 million Brazilians shouldn't be paying income tax

Finance Minister Fernando Haddad criticized previous governments this Saturday 23 for not correcting the Income Tax table, causing more than 20 million lower-income Brazilians to start paying the tax on their salaries .

"The failure to adjust income tax led to a huge tax increase for the economically vulnerable. In other words, the seven years of failure to adjust the income tax table included, in the payment of this tax, around 20 million Brazilians who should not have been paying income tax and started paying it under the Temer and Bolsonaro administrations," said Haddad.

The statement was made during the minister's participation in a debate on the political situation promoted by the Workers' Party (PT), in Brasília, an event that was also attended by Vice President Geraldo Alckmin, PT parliamentarians and members of the party.

The income tax rate was frozen between 2015 and 2022, from the end of Dilma Rousseff's administration (who was impeached in 2016) through the administrations of Michel Temer and Jair Bolsonaro, accumulating a deficit of more than 36% during that period, according to calculations by the National Union of Federal Revenue Auditors (Sindifisco Nacional). Throughout this period, only workers earning up to R$1,903 were exempt.

In 2024, President Luiz Inácio Lula da Silva's government raised the exemption bracket to R$2,824, and in May of this year, this exemption bracket began to benefit those earning up to R$3,036. Now, expectations are for the approval of the exemption for those earning up to R$5,000, a campaign promise by Lula that advanced this week in the National Congress.

"25 million Brazilians will benefit from the income tax adjustment. It's a fiscally neutral proposal, because it will now charge 141,000 Brazilians a tax they don't currently pay. These are Brazilians who earn over R$1 million per year. We're achieving some tax justice by charging those who don't pay, at the top of the pyramid—142,000 Brazilians, or 0.01% of the economically active population—to benefit 25 million Brazilians," Haddad emphasized.

For Haddad, the measure will exempt most workers with formal employment contracts (CLT), with an impact on strengthening income and stimulating the domestic consumer market, directly benefiting the economy.

The Chamber of Deputies unanimously approved last Thursday, the 21st, the urgent request for a bill (PL) that exempts income tax (IR) for those earning up to R$5,000. The bill also provides for a partial tax reduction for those earning between R$5,000 and R$7,350. Authored by the federal government, Bill 1087 of 2025 is reported by Representative Arthur Lira (PP-AL). To offset the loss of revenue from the IR exemption, the bill, already approved by a special committee in the Chamber, provides for an additional progressive tax rate of up to 10% for those earning over R$600,000 per year, or R$50,000 per month.

A study by the Inter-Union Department of Statistics and Socioeconomic Studies (Dieese) estimates that the change could increase the total number of workers exempt from income tax from 10 million to 20 million. The partial tax reduction for those earning up to R$7,300 is expected to reach 16 million people. Currently, those earning up to two minimum wages (R$3,036 per month) are exempt from income tax.

Housing credit

During his participation in the Workers' Party (PT) event, Fernando Haddad also announced that the government is preparing a package of measures to boost access to credit for home purchases in the country, focusing on low-income and middle-class workers. The government's plan is to make savings accounts more flexible to offer cheaper financing.

"We are finalizing negotiations with the Central Bank, Finance and Planning, so that our National Monetary Council can deliver to President Lula another important achievement of boosting real estate credit, with all due caution, but making a cheap source of credit, which is savings, reach low-income and middle-class workers," the minister highlighted.