RIO DE JANEIRO, BRAZIL – The Minister of Economy, Paulo Guedes, submitted the second part of the tax reform to Congress two weeks ago. The bill proposes to tax at 20% the profits and dividends that companies distribute to shareholders.
Almost half of Brazilians surveyed – 45% – are against the proposal. Only 14% approve of the proposal, and 41% neither approve nor disapprove.
The figures come from the latest EXAME/IDEIA survey, a project that unites newspaper EXAME and IDEIA, a research institute specializing in public opinion. 1,248 people were interviewed between June 28 and July 1. The interviews were conducted by telephone, calling both landlines and cell phones. The margin of error is three percentage points higher or lower.
The higher the economic class, the greater the opposition to the proposal to tax profits and dividends. In classes A and B, the disagreement reaches 51%. For people earning more than five salaries, this number grows to 52%. In the segment with higher education, 53% are against the creation of the new collection.
Maurício Moura, the founder of IDEIA, explains that the higher economic classes will be most impacted if the proposal passes Congress. Nevertheless, the contrary sentiment is not concentrated only among the wealthiest.
“There is no support for imposing taxes on individual profits and dividends. Class A and B and the higher education sector are massively opposed to this measure. It’s not as relevant to other segments, but still, there is a critical mass of the population that disagrees with this measure,” he says.
41% support a new income tax floor
Another point of the reform sent to Congress concerns the increase of the income tax increase. The government’s idea is to increase the floor, which is currently R$1,900 per month, to R$2,500. This change is supported by 41% of Brazilians, 18% are opposed, and another 41% are indifferent.
Maurício Moura highlights the great indifference of the population to the proposed increase in the income tax exemption. “Of course, this has less impact on the very low-income group, but I think this indifference to the change in the income tax limit is important and relevant,” he says.
Among those earning up to one minimum salary per month, for whom the proposal would make no difference, those neither agreeing nor disagreeing with the change add up to 51%. In Classes D and E, 55% are indifferent to the change. On the other end, 51% in Classes A and B support raising the cap.
Where do things stand on tax reform?
After several debates within the House during the year, the President of the Chamber of Deputies, Arthur Lira (PP-AL), decided in early May to cancel the joint committee on tax reform soon after reading the rapporteur’s opinion. Behind the scenes, there was government concern about getting support to pass the entire reform all at once.
The option was to separate the text into different parts. The first part is already in Congress and creates the Social Contribution on Transactions in Goods and Services (CBS), replacing the existing PIS and Cofins Contributions. The rate would be 12% and provides for a reduction in tax incentives, but with some exceptions, such as the Manaus Free Trade Zone.
On Thursday, July 1, Lira said that within 15 days, he could approve the two proposals already in the Chamber. “There is a chance that the two bills of the tax reform will be approved before the summer recess, but we need to reach a text that effectively makes improvements in the system, even with simple quorum,” Lira wrote on Twitter.
The problem is that this second part, which changes the income tax floor and taxes profits and dividends, faces opposition within the House. The leaders of the Cidadãos and PSDB parties in the Chamber are considering a counter-proposal to that of the rapporteur.