IR: Increase in the exemption range is below inflation; understand the changes approved by the Chamber

RIO – The text of the project that changes Income Tax rules (PL 2337/21) was approved by the Chamber of Deputies last Thursday and now needs to go through the Senate. Among the main points, the proposal increases the exemption range, which has not been updated since 2015. Experts warn that, even so, the value is below inflation.

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In the Personal Income Tax (IRPF) table, the exemption range goes from R$1,903.98 to R$2,500 monthly, correction of 31.3%. This means that those who receive up to R$2,500 will no longer be required to send the declaration to the IRS and will be free of discounts.

The tax lawyer André Moreira, a partner at Sacha Calmon Misabel Derzi, says the adjustment is not enough, as it does not match the inflation rate for the period. For him, the exemption amount would have to be increased to around R$ 4 thousand, the price of the ideal minimum wage calculated by the Inter-Union Department of Statistics and Socioeconomic Studies (Dieese).

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A study by the National Union of Tax Auditors of the Federal Revenue (Sindifisco), released in February, even showed that the lag in the table was 113.09%, considering the accumulated inflation from 1996 to 2019. Thus, the exemption range should be expanded to those earning up to R$ 4,022.89. The correction of the table was a campaign promise by President Jair Bolsonaro in 2018.

— If I don’t correct the table for inflation, I’m raising the lawless income tax. They are selling a false promise of benefit to the worker — criticizes.

The professor of Accounting Sciences at Ibmec, Paulo Henrique Pêgas, agrees that the exemption range is outdated, but considers that the new value is what is possible for the country’s fiscal situation. According to the rapporteur and deputy Celso Sabino (PSDB-PA), calculations estimate that around 16 million Brazilians will be exempt.

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The measure also changes the tax to be deducted for other taxpayers, being a “progressive reform”: whoever earns more will pay more tax. A citizen, for example, who receives R$ 40 thousand per year and currently has the income tax due of R$ 686.42, will pay only R$ 150. Meanwhile, another citizen who receives R$ 120 thousand and owes R$ 17,960.24 of tax, will be required to pay R$17,977.50 — a difference of R$17.60. The increase, however, is seen as contribution stability.

— By putting more money in the hands of people with lower income, this value returns to the market because it will be used for consumption, which can help stimulate the economy — says Pegas: — I believe that changes still need to be made in the text, but we are on the right path. It’s like you’ve chosen the right medicine in the wrong dosage.

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Currently, in the simplified declaration, the discount is 20% of taxable income, limited to R$ 16,754.34, which replaces deductions such as expenses with health, education and dependents. According to the approved text, the limit goes to R$ 10,563.60.

EY Brazil’s senior tax manager, Felipe Coelho, warns that, if the text goes ahead, the new rules will take effect next year, and their effects will be felt in the declaration sent in 2023, referring to the base year 2022.

Coelho also adds other changes to the proposal for individuals:

— Before, the taxpayer had to monthly calculate the tax related to investments in shares and pay it off. Now this will be done on a quarterly basis. Thus, the exemption for sales changes from R$ 20 thousand to R$ 60 thousand, which does not represent an increase because the relative period goes from one to three months – explains the manager: – Another thing is that the compensation if you have losses will be allowed regardless of the quarter and the nature of the transaction.

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Property value update

Property owners will be able to update the value of the property on the income tax return, if it is out of date. Until then, the taxpayer could only do this in case of sale. The novelty will allow you to pay 4% tax on the valuation, instead of 15% at the time of negotiation. Thus, when selling the property, the tax to be calculated will be much lower.

A person who owns an old property worth R$100 thousand, but which has appreciated to R$1 million, can calculate the tax in advance and pay less to the public coffers. EY Brazil’s senior tax manager, Felipe Coelho, considers that the option is only advantageous for those who intend to sell in the future.

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— The spontaneous update only makes sense for those who intend to sell the house or apartment. If you want to live in the property forever, you have no reason to pay this tax – he opines.

The tax lawyer André Moreira assesses that this was a way that the government found to collect in the short term and believes that this part of the proposal is just an accessory.

— There are other more important points, such as the taxation of profits and dividends, which, in my opinion, will alienate investors and compromise the country’s growth — he adds.

System remains complex

For the coordinator of studies at the Economic Observatory of the Methodist University of São Paulo (Umesp), Sandro Maskio, the reform of the income tax is not enough to solve the complexity of the Brazilian tax system, which, as a whole, is very regressive.

— It is a complex and difficult change to be made because it involves interests from different social classes and different spheres of power. But when we slice the reform, making small changes, we lose a little sense of the whole — believes Maskio: — There is something very unfair in Brazil today, which is the indirect tax. When a poor person buys a product, he or she pays the same taxes built into it as a rich person, and thus ends up spending all his income on basic items to survive.