Brazil: President Lula confirms minimum wage at US$252.9 and income tax exemption at US$505.8

President Luiz Inácio Lula da Silva (PT) confirmed, on Thursday morning (16), that the minimum wage will be readjusted to R$1,320 (US$252.9) as of May and that the income tax exemption range will rise to R$2,640 (US$505.8).

The announcement was made during an interview with CNN Brasil that will be aired earlier this evening.

In an excerpt released by the channel, the president says that the adjustment is already “agreed with the Ministry of Labor, with Minister [Fernando] Haddad [of Finance], that we will adjust in May and establish a new minimum wage rule that we already had in my first term.”

The rule, according to Lula, is that the adjustment of the minimum wage will be based on inflation and the growth of the GDP (Gross Domestic Product, the sum of all goods and services produced in the country), as he had been saying since the beginning of his government and throughout the 2022 election campaign.

“There is no point in the GDP growing 14% and not distributing it. It is important that it grows 5%, 6%, and 7%, and you distribute it to society,”  the president said.

“That is what will happen; we will increase the minimum wage every year. Inflation will be restored, and the GDP growth will be put on the minimum wage, ” the president added, without mentioning how future readjustments will be calculated.

The adjustment of the minimum wage had already been signaled earlier this week by Minister of Labor and Employment Luiz Marinho, who said he was studying the budget to see if there would be fiscal space to increase beyond the current R$1,302, but without citing a new value.

INCOME TAX EXEMPTION

Lula also confirmed that he would partially correct the income tax exemption range table, which will be readjusted from R$1,903.38 to R$2,640.

The proposal from the economic team of the Finance and Planning Ministries was sent to him earlier this week.

“It will start from now, we will begin to exempt from R$2,640, and then we will gradually until we reach R$5,000 of exemption,” said the president without citing a specific date.

The value, however, will correspond to two minimum wages than will come into force in May.

The correction of the Income Tax table was also a campaign promise, and it was doubtful in the economic team if it would be implemented all at once or in stages.

In early February, Planning Minister Simone Tebet said that the first part of the correction would be made before Congress approves the consumption tax reform.

Above that, Tebet mentioned, it will only be possible after discussions begin on the second part of the reform, covering new tax rules for income.

“It is not the tinkering with the whole income tax table – this requires a second reform, which is the income tax reform [after one on consumption]. It’s [a proposal to] ensure that the income table is updated minimally for the exempt,” she said.

With information from Gazeta do Povo

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