💰 Tax reckoning?

Tax season officially began in Brazil this week, as the Federal Revenue Service opened the window for citizens to file their 2025 returns. Notably, it will be the last time that Brazilians earning up to BRL 5,000 (USD 950) a month will have to pay income tax.  

Since February, workers in that earnings bracket are no longer having income tax withheld from their paychecks, in what is the first tangible payoff of a reform that President Luiz Inácio Lula da Silva's administration pushed through Congress last year. The reform also expanded partial relief for those earning up to BRL 7,350, easing the burden on ~10 million taxpayers in total, while introducing a minimum effective tax rate for those with monthly incomes of above BRL 50,000.

The administration is hoping that fatter paychecks will translate into electoral dividends. According to a recent Atlas Intel poll, raising the income tax exemption threshold to BRL 5,000 was one of the government's most popular measures, with 75% approval among Brazilians.

But the importance of the reform goes far beyond electoral arithmetic. Although still modest — its effects are not expected to exceed 0.6% of GDP — it marks a genuine break from a historical pattern of income tax policy that, for decades, has quietly deepened the country's inequality rather than addressing it…

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