Lula’s government is considering creating a “minimum tax” for millionaires

the Ministry of Finance to Lula’s government It is considering implementing a minimum tax targeting millionaires in BrazilThis is to ensure taxation of high incomes. The discussion is taking place confidentially among members of Minister Fernando Haddad’s team.

The proposal indicates that this minimum tax acts as a counterpart to increasing the personal income tax exemption (IRPF) to R $ 5,000, an election promise of Luiz Inacio Lula da Silva (PT). Currently, the exemption is the minimum wage, or R$2,824.

This initiative follows the introduction of the global minimum tax, which added a rate to the social contribution on net profit (CSLL) of multinational companies, ensuring a minimum of 15%. For millionaires, the rate can range between 12% and 15%.

The tax calculation will compare the minimum tax amount with the amount currently paid. If the minimum tax is higher, the taxpayer must pay the difference in the annual IRPF adjustment. Nearly 250,000 people with income exceeding R$1 million could be affected.

Tax implications of the Brazilian tax system

The government is analyzing whether to exclude some currently exempt income from the calculation rule. The Brazilian tax system is regressive, and Lula’s government seeks to make it more progressive, so that higher incomes contribute to proportionately higher taxes.

There are concerns that the minimum tax could impact the planned structural tax reform, which includes the taxation of profits and dividends and a reduction in the corporate income tax (IRPJ).

Correcting the exemption band of the regional interest rate framework to R$5,000 could cost up to R$50 billion, affecting all income groups. The economic team is working to reduce this impact to R$35 billion, limiting the exemption to those who already earn R$5,000.

In 2024, the exemption was revised to R$2,824, which is still far from the target. This was the first increase after eight years without changes. The 2025 budget proposal does not provide for this correction.

Next steps for Lula’s government

The minimum tax proposal is in line with the ideas of French economist Gabriel Zucman, who advocates global taxation of the “ultra-rich.” Zucman proposes imposing a 2% tax on wealth exceeding $1 billion.

Economic Policy Minister Guilherme Melo indicated that tax reform will start with individuals. Fernando Haddad presented the scenarios to President Lula, who will decide when to send them to Congress.

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