Brazil Weighs Raising the Income Cap for Micro-Entrepreneurs

BRAZIL · ECONOMY

Brazil is moving to loosen the rules for its millions of micro-entrepreneurs, raising the income ceiling that defines the category and letting them hire more help, though the cost has the government wary.

What the Micro-Entrepreneurs Bill Would Change

Brazil runs a simplified tax-and-benefits regime for individual micro-entrepreneurs, known by the initials MEI. To qualify, annual revenue must stay under R$81,000, about US$16,000, a ceiling unchanged since 2018. A bill in Congress would lift it.

The Senate set the new cap at R$130,000, about US$26,000. The lower house pushed it higher, to roughly R$145,000, about US$29,000, with annual inflation adjustment. The bill would also let a micro-entrepreneur employ two workers instead of one.

Why the Government Is Wary

The price tag is the sticking point. The Finance Ministry estimates the looser rules could cost around R$50 billion, about US$10 billion, a year in forgone revenue. Officials have called the lower house’s version, with automatic inflation indexing, unconstitutional.

The government wants to negotiate a smaller increase and phase in the changes. The measure became entangled with the wider debate over the six-day work week. That has slowed its path to a vote.

Who It Affects

The MEI regime is a pillar of Brazil‘s formal economy. Millions of people, from hairdressers to delivery riders, use it to pay lower taxes and gain basic benefits. The frozen ceiling has pushed some past the limit as prices rose.

Supporters say a higher cap lets small firms grow without losing the simplified rules. Critics warn it could erode the tax base and tempt larger businesses to disguise themselves as micro firms. The final number will decide the balance.

Frequently Asked Questions

What is a MEI?

It is Brazil’s simplified regime for individual micro-entrepreneurs. It offers lower taxes and basic social benefits to people who run very small businesses.

How high could the ceiling go?

The Senate approved R$130,000 (about US$26,000), and the lower house pushed for roughly R$145,000 (about US$29,000). The government wants a smaller rise.

Why is the government hesitant?

It worries about the fiscal cost, estimated near R$50 billion (about US$10 billion) a year, and wants to phase in any change to protect the budget.

Connected Coverage

For more on Brazil’s economy, see The Rio Times on the debate over the six-day work week and on Brazil’s record human development score.