Deputado Arthur Lira from Alagoas has been leading the charge in the reform of the Income Tax (IR) system, making sure that states and municipalities are taken care of in case they suffer revenue losses due to the changes proposed in the project. In a recent session at the special committee handling the project in Congress, Lira presented his report, outlining key measures aimed at balancing the impact on different levels of government.
“One crucial aspect we have included is that any decrease in revenue for states and municipalities resulting from this new legislation will be offset by compensatory measures by the Union,”
highlighted Lira during his presentation. This move comes as a reassurance to local governments that might face financial challenges as a consequence of the proposed tax reforms.
Among the noteworthy points outlined in Lira’s report is the decision to maintain a maximum 10% tax rate for high-income individuals while raising the partial exemption threshold from R$7,000 to R$7,350 per month. Additionally, Lira endorsed the government’s proposal for a full exemption for those earning up to R$5,000 monthly.
To address concerns about potential revenue shortfalls at lower governance levels, Lira specified that any additional income generated by these legislative changes will be utilized to support States, Federal Districts, and Municipalities through transfers from State Participation Funds (FPE) and Municipal Participation Funds (FPM).
“The Union’s increased revenue resulting from this law will serve as a compensation source for States and Municipalities if there is a reduction due to measures outlined within this legislation,”
explained Lira.
In his comprehensive assessment of the reform bill’s financial implications, Deputado Arthur Lira projected a surplus of R$12.27 billion which could be earmarked for assisting subnational entities facing economic challenges. This proactive approach aims to mitigate potential disparities across different tiers of government caused by alterations in income tax regulations.
Despite initial reservations expressed by the Ministry of Finance regarding mandatory compensation mechanisms, arguing that States and municipalities would experience both losses and gains under the new system, Deputado Arthur Lira remains steadfast in his commitment to safeguarding local interests amidst broader fiscal reforms.
