Brazil’s Tax Increase Bill

BRASILIA (Reuters) – Brazil’s government submitted a bill to Congress designed to increase income taxes as part of a revenue-raising effort, notably targeting banks with a higher tax rate.

The proposed legislation aims to amend the social contribution tax on corporate income (CSLL) and interest on equity payments (JCP).

Last week, Finance Minister Fernando Haddad reported that these two proposals would be sent to Congress to adhere to budgetary rules. This step is necessary to counterbalance payroll tax exemptions recently approved by the Senate, although specific details of the proposed tax increases were not disclosed.

The key points of the proposed bill include:
– CSLL Increase for Banks: The CSLL rate for banks will be raised to 22% until the end of 2025, reverting to 20% starting January 2026.
– CSLL Increase for Insurance and Brokerage Firms: Private insurance companies, capitalization firms, and brokerages would see the CSLL rate increase to 16% until the end of 2025, and return to 15% in 2026.
– CSLL Increase for Other Companies: Other companies would face an increase to 10% until the end of 2025, with a return to 9% in 2026.
– JCP Tax Rate Adjustment: For JCP, which allows companies to deduct these payments from corporate taxes, the income tax rate is proposed to rise to 20% from the current 15%.

The administration of leftist President Luiz Inacio Lula da Silva is scheduled to submit its 2025 budget bill to Congress soon. This bill will detail expected expenses and revenue forecasts, aiming for a continuous zero primary deficit, allowing a margin of up to 0.25% of GDP.

By initiating this bill to raise income taxes, the government aims to establish a legal framework necessary to incorporate projected revenues into the upcoming budget proposal.