{"id":94488,"date":"2025-06-09T10:50:44","date_gmt":"2025-06-09T13:50:44","guid":{"rendered":"https:\/\/murray.adv.br\/?p=94488"},"modified":"2025-06-09T10:50:44","modified_gmt":"2025-06-09T13:50:44","slug":"government-hammers-out-deal-to-offset-iof-increase","status":"publish","type":"post","link":"https:\/\/murray.adv.br\/en\/government-hammers-out-deal-to-offset-iof-increase\/","title":{"rendered":"Government hammers out deal to offset IOF increase"},"content":{"rendered":"
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Agreement negotiated by Finance minister includes tax hike on bets, ending breaks for LCI and LCA<\/strong><\/em><\/h6>\n<\/div>\n<\/div>\n
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06\/09\/2025\u00a0<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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After a five-hour meeting, Finance Minister Fernando Haddad and congressional leaders agreed on a package of measures designed to offset the revenue loss from partially scaling back a decree that raised the Financial Transactions Tax (IOF). The proposals include higher taxes on sports betting and the elimination of the income tax exemption for LCI and LCA fixed-income securities. Broader structural measures, such as cuts to tax benefits not enshrined in the Constitution and administrative reform, were also discussed.<\/p>\n<\/div>\n

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The more immediate proposals will be implemented via a provisional measure (MP), which takes effect immediately but must still be approved by Congress. In the case of ending the income tax exemption for LCI and LCA, the change would take effect in 2026 due to Brazil\u2019s fiscal annuality rule.<\/p>\n<\/div>\n

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The new MP would allow the government to reissue the IOF decree with lower tax rates. These changes still require approval from President Luiz In\u00e1cio Lula da Silva, who is due to return from France on Monday evening (9).<\/p>\n<\/div>\n

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The revised plan is expected to reduce the fiscal impact of the IOF decree by one-third. According to the Finance Ministry, this shortfall will be offset by the MP. In its current form, the decree was projected to generate R$19.1 billion in 2025 and R$38.2 billion in 2026.<\/p>\n<\/div>\n

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The government presented the new proposals after intense backlash from lawmakers, who threatened to overturn the original decree. Chamber of Deputies Speaker Hugo Motta said the alternative measures are less harmful than the original tax hike.<\/p>\n<\/div>\n

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\u201cThe MP provides the government with financial compensation, but it’s much less damaging than the continuation of the original IOF decree. Plus, we\u2019ve opened the door for a broader and more meaningful debate on tax exemptions,\u201d Mr. Motta said.<\/p>\n<\/div>\n

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One key element of the MP is raising the tax rate on Gross Gaming Revenue (GGR) from 12% to 18%, aligning with the government\u2019s original proposal to regulate the betting sector. GGR refers to the total amount wagered, minus the payouts to players.<\/p>\n<\/div>\n

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Another measure targets incentives for LCI and LCA investments. According to Mr. Haddad, these instruments\u2014currently exempt from income tax\u2014will now be taxed at 5%. \u201cThese securities will no longer be tax-free but will still enjoy significant incentives. We\u2019re narrowing the gap between 0% and 17.5% down to 5%,\u201d he explained.<\/p>\n<\/div>\n

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The MP will also standardize the Social Contribution on Net Profit (CSLL) paid by financial institutions. The preferential 9% rate for fintechs will be eliminated, leaving the standard rates of 15% and 20%.<\/p>\n<\/div>\n

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Under the revised IOF decree, one significant change involves the tax on reverse factoring\u2014a form of early payment to suppliers by banks. This measure had drawn strong criticism from the financial and retail sectors.<\/p>\n<\/div>\n

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\u201cThe most affected part of the IOF will be on risco sacado. The fixed component of this tax will be removed, and the daily rate will be recalibrated to better align with the existing credit system,\u201d Mr. Haddad said. The original decree set a fixed IOF rate of 0.95% for reverse factoring, along with a daily rate of 0.0082%. The fixed rate will be eliminated, and the daily rate adjusted.<\/p>\n<\/div>\n

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As for Brazil\u2019s broader system of tax expenditures, Mr. Haddad said the plan is to reduce them by at least 10%, although the exact figure has yet to be finalized. According to reporting by Valor Econ\u00f4mico, essential items such as the basic food basket, Simples Nacional regime, and the Manaus Free Trade Zone will be spared.<\/p>\n<\/div>\n

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\u201cWe agreed here on cutting tax expenditures by at least 10%. Everything will be subject to deliberation by Congress. The Executive\u2019s initiative is based on input from both congressional presidents and leaders who participated in the meeting,\u201d Mr. Haddad stated.<\/p>\n<\/div>\n

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Mr. Motta emphasized that the specifics of how tax incentives will be trimmed remain under discussion. \u201cIn the coming days, we will primarily target exemptions found in infra-constitutional legislation. There\u2019s a suggestion to cut by 10%, but we might implement this gradually. The final structure is still up for debate,\u201d the Chamber speaker said, adding that political feasibility will be a key consideration.<\/p>\n

* By\u00a0J\u00e9ssica Sant\u2019Ana\u00a0and\u00a0Andrea Jub\u00e9\u00a0\u2014 Bras\u00edlia<\/p>\n

Source: Valor International<\/p>\n

https:\/\/valorinternational.globo.com\/<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Agreement negotiated by Finance minister includes tax hike on bets, ending breaks for LCI and LCA     06\/09\/2025\u00a0 After a five-hour meeting, Finance Minister Fernando Haddad and congressional leaders agreed on a package of measures designed to offset the revenue loss from partially scaling back a decree that raised the Financial Transactions Tax (IOF). 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