On Tuesday, President Luiz Inácio Lula da Silva ended a planned tax hike for 17 vital sectors. This move delays taxes until an urgent bill, still to come, resolves the issue.
Lula’s choice followed a pact with National Congress leaders. Minister Alexandre Padilha shared this, noting its publication in the next day’s Official Gazette.
Despite Congress extending tax breaks in 2023, Lula initially vetoed them.
After his veto was overturned, he proposed a new measure, reintroducing tax increases by 2027 but also targeting revenue boosts through other means.
These included ending certain tax benefits and setting limits on tax compensations based on court rulings. These remain unchanged until Congress acts.
Padilha explained that this shift towards an urgent legislative proposal allows for ongoing discussion on remaining issues.
The need for approval means the bill’s impact is delayed and uncertain. This approach avoids the immediate tax burden the original measure would have imposed in April.
The government’s backtrack came amid legislative pushback and a call for the measure’s rejection based on prior decisions.
After intense negotiations, the government agreed to drop the contentious parts.
Additionally, Lula removed a tax increase for smaller municipalities, leaving future actions open.
Associations and unions recently rallied for these sectors, stressing the importance of maintaining their tax benefits.
Now, these sectors, spanning from apparel to transport, continue to enjoy tax exemptions, reflecting a significant policy shift.
In short, this decision underscores the complexities of tax policy, the importance of legislative negotiation, and the broad impact on various economic sectors.