On October 30, the Chamber of Deputies rejected the proposal to create the Wealth Tax (IGF) with 262 votes against and 136 in favor. This measure, part of the second regulation project of the tax reform, aimed to tax assets over R$ 10 million. With the exclusion of the tax, the text moves on to the Senate for review without specific provisions for taxing large fortunes.
According to the amendment, large fortunes would be considered as the total value of assets and rights of any nature, both in Brazil and abroad, exceeding R$ 10 million. The proposal outlined the creation of an annual tax with progressive rates: 0.5% for fortunes between R$ 10 million and R$ 40 million; 1% for those between R$ 40 million and R$ 80 million; and 1.5% for assets exceeding R$ 80 million.
The tax would apply to both individuals and companies. For individuals, assets in Brazil and abroad would be considered, while for companies, only assets and rights held in Brazil would be considered. Additionally, administrators of structures like condominiums and funds established abroad but holding assets in Brazil would also be subject to the tax.
On the other hand, excluded from the tax base would be properties valued at up to R$ 2 million, debts related to the acquisition of equity interests, outstanding loan balances, and up to R$ 500,000 related to instruments used to generate labor income.
According to the PSOL deputy responsible for the amendment, the implementation of the IGF could result in additional revenue of up to R$ 70 billion.
The tax proposal faced strong resistance from parties such as PL, PP, MDB, and União Brasil, which instructed their members to vote against it. On the other hand, the government chose to free its bench, allowing independent voting. Parties such as PSB, PT, PCdoB, PV, and PSOL supported the measure, arguing that the IGF would be a tool for promoting fiscal justice and combating social inequalities.
Most deputies opted to vote against the proposal, maintaining the base text of the tax reform approved in August 2024. Additionally, parliamentarians also rejected another proposal that suggested imposing a tax on inheritance from complementary pensions.
The IGF is a recurring topic in discussions about taxation in Brazil, but it faces significant challenges to its approval, mainly due to resistance from political and business sectors. With the exclusion of the tax, the approved text now moves to the Senate, where it may be revised before being sanctioned.
The decision of the Chamber of Deputies reinforces the priority given to the regulation of other aspects of the tax reform, such as the creation of the Committee for Goods and Services Tax (IBS), which should be established 120 days after the sanction of the complementary law.
Although rejected in the Chamber, the topic of taxing large fortunes remains prominent both in Brazil and globally. During the G20 Summit, held on November 18-19 in Rio de Janeiro, the taxation of the “super-rich” was included in the final declaration of the meeting.
The proposal, sent by Brazil to the group in June of this year, has strong support from President Luiz Inácio Lula da Silva. Its inclusion in the final G20 document reflects a growing consensus among leaders of the world’s largest economies on the need to tax large fortunes as part of efforts to promote global fiscal justice.
The proposal has sparked intense debates among experts, with many arguing that the measure could lead to capital flight, further burden the tax system, and drive away investments from the country.
For instance, expert Gianluca Di Matina describes the proposal as ‘problematic,’ pointing out that implementing a minimum tax on large fortunes requires a robust monitoring system and effective international cooperation to prevent tax evasion. Without these mechanisms in place, taxing large fortunes could cause more harm than good, especially for emerging countries.
Although the Wealth Tax was rejected by the Chamber of Deputies, the debate over its implementation remains relevant, both in Brazil and internationally. Political resistance and the complexities of its application highlight the challenges for the approval of more aggressive fiscal measures in the country. The inclusion of the proposal on the G20 agenda and the questions raised by experts highlight the growing global attention on taxing the “super-rich.” It remains to be seen how this topic will continue to evolve in Brazil and whether new proposals on this matter will be presented.
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Published on December 9, 2024