‘Populist’ income tax reform has the opposite effect on the economy

The Chamber of Deputies managed the feat of approving a new regime for charging the Income Tax of individuals and companies that promotes some intriguing effects: it increases the tax burden for large companies and reduces the collection of the Union, states and municipalities (and here it is a huge contradiction).

In short, the project – which has yet to pass through the scrutiny of senators – worsens the complexity of the system, which already occupies the place of worst in the world. And, perhaps most surprising: it widens the distance between those who earn more and pay less – a historical characteristic of Brazil.

In today’s episode, we went through the main repercussions with tax authorities, economists’ views and the effects on the financial market.

As it is, the project will always leave the question: does the company grow because it is its path, or does it become small to pay less tax?

In addition, economist Bernardo Appy points out that the approved proposal will worsen the composition of the Brazilian tax burden, increasing the burden on consumption and reducing it on income.

That’s because the government will exempt from income tax self-employed professionals with very high income, which can reach R$ 100,000 per month, and charge more taxes on medicines.

One of the biggest distortions of the Brazilian system is precisely this imbalance between taxation on consumption – which is regressive – and on income – which is progressive, that is, (should) charge more from those who earn more.

Many entrepreneurs have already started to call lawyers and accountants to understand how they can be affected and if it is time to start doing something.

In addition to the tax reform, or a reverse of it, the wave of revisions to GDP and inflation that took place in recent days also impacted the market.

It is rare to find anyone who believes that the IPCA will be below 7% at the end of the year, with the exception of the Ministry of Economy, which foresees 5.9%, according to the Budget Bill (PLOA) that went to Congress.

The stock market on Thursday (2) fell 2.23% and returned to the level of 116 thousand points. Those who pushed the index down the most were the banks that lost a lot, because they will have a good bill to be paid with the approved reform project.

The dollar was practically stable – and this is not good news, because it costs the country higher interest rates on futures contracts.

The agenda for this Friday (3) awaits external data and, of course, the movement in Brasília.

In this episode of Opening the Market, CNN economics commentator Thais Herédia hears from experts about these fears and talks about events inside and outside the country that directly impact our economy.

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