The number of Brazilians who would be exempt from paying income tax would almost triple if the table were corrected for the inflation accumulated since 1996.
The exemption range would increase for those who earn less than R$ 4,465.35, according to a survey by the National Association of Tax Auditors of the Federal Revenue of Brazil (Unafisco).
Currently, those who earn more than BRL 1,903.98 monthly, less than two minimum wages, pay IR. Only 8.2 million people do not pay IR because they have income below this amount, which has not been corrected for years.
This number would jump to 23,506,672 Brazilians, if the exemption range were adjusted, in Unafisco’s calculations.
Lag exceeds 134%
The association estimated this number based on data from the Federal Revenue Service itself. The lag of the Individual Income Tax (IRPF) table is 134.53%, corresponding to the accumulated inflation between 1996 and 2021.
If the correction were made, another 15,299,260 people would be exempt from paying the tax.
“That is, for calendar year 2022 (statements that will be delivered in April/2023), 15,299,261 taxpayers, who could be in the exemption range, will bear the tax burden due to the non-full correction of the IRPF table” , says report.
In addition to projecting the number of exempt taxpayers, Unafisco also calculated the impact on federal revenue for this calendar year.
Without any change in the table, the collection should reach R$ 290.5 billion. If the exemption range were corrected, in 2022 alone the government would fail to collect BRL 164.5 billion, more than half of the total.
The lag in the Bolsonaro government is almost 25%
Unafisco also estimated the lag of income tax only during the administration of President Jair Bolsonaro.
If he wanted to “zero” the lag in relation to inflation registered only in his government, the IR table would have to be readjusted by 24.49%.
It is the value of accumulated inflation between 2018 and 2021 calculated by the entity. If this correction were made, the exemption range would go from the current BRL 1,900 to BRL 2,370.31, which would reach 12,857,310 taxpayers in 2022 and reduce the collection by BRL 48.1 billion.
IR reform stalled
The Jair Bolsonaro government even presented a proposal to reform the IR, expanding the exemption range and correcting the table. According to the text, the exemption range would be expanded to R$ 2,500.
The proposal was approved in the Chamber, but stalled in the Senate, because there were differences in relation to changes in taxes for companies.
Senator Angelo Coronel (PSD-BA), rapporteur of the proposal in the House, even presented a new project, in which he only promoted the correction of the IRPF table, with an increase in the exemption range to R$ 3,300.
Unafisco estimates that, in this scenario, 18,971,686 people would be exempt in 2022, which would represent a loss in revenue of R$ 42.6 billion. Coronel’s project was filed at the end of 2021 and still has no forecast for processing.