Lower House passes urgency motion to revoke IOF tax hike by 346–97

Lower House Speaker Hugo Motta of the Republicans Party scheduled the plenary session for 6 p.m., local time, but proceedings did not begin until after 8 p.m. In the same session, lawmakers also approved another urgency motion, this time to fast-track a bill that updates the income tax bracket and exempts individuals earning up to two minimum wages. The proposal mirrors a provisional measure issued in April.

Mr. Motta spent the afternoon in meetings with party leaders and ministers Rui Costa (Chief of Staff Office) and Gleisi Hoffmann (Institutional Relations), who were met with numerous complaints from lawmakers.

At the end of the meeting, Mr. Motta said he reiterated to the two ministers what he had told President Lula the previous Saturday: Congress will no longer accept tax hikes as a way to balance public finances. He said the government had pledged to send a package of spending cuts. “We’re waiting,” he said.

In addition to opposition parties, several groups that control eight ministries—Brazil Union, Social Democratic Party (PSD), Progressive Party (PP), Republicans, and the Democratic Labour Party (PDT)—urged their members to vote in favor of the urgency motion. The PDT distanced itself from the government after the dismissal of former Social Security Minister Carlos Lupi, amid the National Social Security Institute (INSS) scandal. Other left-wing parties and the Brazilian Democratic Movement (MDB) voted against the motion.

Facing likely defeat, the government’s leader in the Lower House, José Guimarães of the Workers’ Party (PT), allowed his caucus to vote freely in an effort to mask the extent of resistance the administration faces. He added, however, that the government would not submit cost-cutting proposals affecting social programs.

Finance Ministry officials had already anticipated that the urgency motion would pass with more than 300 votes but believe congressional leaders remain open to negotiating alternatives that would prevent the decree from being overturned. Lawmakers aligned with the government told Valor they still see room for dialogue.

Many party leaders pushed for an immediate vote on the PDL itself, but a compromise prevailed, giving the government more time to present alternatives. Some of these options are included in the provisional measure sent to Congress last week, though the expectation is that the text will undergo major revisions.

Lindbergh Farias, the Workers’ Party leader in the Lower House, praised Mr. Motta’s handling of the process and said the urgency vote reflected some lawmakers’ desire to negotiate the content of the provisional presidential decree. He nonetheless defended the IOF increase, arguing it would help balance the budget without significantly impacting lower-income Brazilians.

“Where is the working class really affected by this IOF hike?” he asked. “This measure targets those at the top. In this country, we see sectors clamoring for fiscal adjustment, but always on the backs of the poor.”

Mr. Motta countered that lawmakers do not support balancing the budget at the expense of the poorest, but stressed the importance of avoiding harm to “those who produce, create jobs, and generate income,” referring to the business sector.