Lula praises the exemption from international relations and says the measure should pump R$28 billion into the economy in 2026 | policy

This proposal is one of his administration’s main bets to increase the government’s popularity and strengthen the path to re-election in 2026.

“This income tax exemption means more money in your pocket, which means more purchasing power, which means an increase in consumption, which makes the wheel of the economy turn. Federal revenues have done their calculations. In 2026, this additional money in the hands of the Brazilian people should pump R$28 billion into the economy,” Lula said in his speech.

According to him, the additional funds are an “exceptional stimulus” to trade, industry, the service sector and entrepreneurship, and will “generate more jobs, more opportunities and more income.” With a Selic interest rate of 15% per year, the central bank seeks to slow economic activity to combat inflation. Injecting resources into the economy throughout 2026 could further challenge the monetary authority and influence the pace of interest rate declines.

He continues that the exemption would result in a person on a salary of R$4,800 saving R$4,000 in one year, which is “almost a 14th salary.” From January next year, “what is currently considered a deduction on your pay” will become “extra money in your pocket,” he says. “For the first time, more than a hundred years after the start of the income tax, the privileges of the small financial elite have given way to the achievements of the majority of the Brazilian people (…) And most importantly: compensation will come not from cuts in health or education, but from taxes on the wealthy, who earn more than a million Brazilian reals a year and today pay nothing or almost nothing in taxes.”

“We will remain resolute in fighting the privileges of the few to defend the rights and opportunities of the majority. Our government stands with the Brazilian people, to build a more prosperous, stronger and, above all, more just country,” he said. Finally, he said that the new law attacks the main inequality in Brazil: the so-called “tax injustice.”

Lula used the speech to highlight other programs. He said that for the second time, he removed the country from the hunger map. Which placed “Brazil once again among the ten largest economies in the world”; He highlighted the low unemployment rate; the creation of Pé-de-Meia, a financial and educational incentives initiative; And the greatness of the new light for all.

Approved last week, the project, which expands the IR exemption to those earning up to R$5,000, is supposed to benefit 15.5 million people, by extending the tax break to those who receive up to R$5,000 per month and by granting a partial salary deduction of up to R$7,350.

On the other hand, the order creates a minimum tax on high income, starting with those who receive at least R$600,000 per year and reaching a rate of 10% on income of R$1.2 million per year. Those who earn between R$5,000 and R$7,350 per month will receive phased discounts.

Exemptions and deductions will result in savings for these taxpayers. The proposal also applies, from 2026 onwards, a 10% tax on dividends distributed to the same individual in amounts exceeding R$50,000 per month.

Regarding dividends transferred abroad, the tax will be 10% on any amount distributed, and will also apply to legal entities, in addition to individuals. Currently, dividends are exempt from income tax.

The proposal was the subject of controversy among parliamentarians during its progress in Congress. The rapporteur of the proposal in the Senate, Renan Calheiros (MDB-AL), did not make changes to the content of the text approved by the House of Representatives so that the text would not return to the hands of his political rival, Representative Arthur Lira (PP-AL).