Lula vows to tax the rich, spare the poor

President says he wants to change income tax and collect more from those who receive dividends


Por Renan Truffi, Fabio Murakawa — Brasília
18/01/2023

President Luiz Inácio Lula da Silva — Foto: Divulgação/Ricardo Stuckert

President Luiz Inácio Lula da Silva said Wednesday that his government will “change the logic” of Income Tax in Brazil, even if this requires a “fight” with businesspeople. The president explained that his goal is to exempt from income tax all those who make up to R$5,000 a month. For this, he signaled that “it is time” to collect this tax from the “rich” who receive “dividends.”

Mr. Lula also said that he quarrels with the Workers’ Party (PT) economists over this issue because they say that if you do this [exempting workers earning up to R$ 5,000], it will cause a 60% in revenue. “Let’s change the logic and decrease for the poor and increase for the rich,” he added.

The president endorsed the statement of the Minister of Finance, Fernando Haddad, that it is necessary to make a tax reform as soon as possible to ensure the payment of a minimum wage above inflation.

The comments were made during the signing ceremony of an order that determines that the ministries develop, within 90 days, a proposal to institute a minimum wage valuation policy. The act was attended by hundreds of union leaders because the goal is to announce the value of the new benefit until May 1st, when Labor Day is celebrated, a symbolic date for the PT voters.

On the issue of the minimum wage, Lula hinted that the issue is linked to tax reform and that only a real policy of increasing the minimum wage can make the economy turn around.

“I liked a statement made by [finance minister Fernando] Haddad. He said that we will make the tax reform in the first semester and for this we need discussion and a lot of pressure from you. It is possible to raise the minimum above inflation and this is the best way to distribute income. If the GDP grows, the minimum wage has to go up according to the growth of the economy,” he argued.

But the negotiations with the Ministry of Finance are still deadlocked. The budget approved by Congress last year foresees a minimum of R$1,320 this year, but the central unions are asking for R$1,342, which is incompatible with the balance of public accounts.

On the issue of the minimum salary, Mr. Lula hinted that it is possible to increase the minimum wage above inflation, and this is the best way to make income distribution. “If the GDP grows, the minimum wage has to rise according to the growth of the economy,” he said.

Mr. Lula also talked about a possible repeal of the labor reform in a clear move to please the union centers but then pondered that the administration needs to “build” a solution with Congress so that the changes are not overturned later.

“We want to build together with the union movement a new union structure, with new rights, in a different economy. The world of work has changed a lot. Gigs have grown. We don’t want the worker to be an eternal gig worker, but rather to have guaranteed rights and a social security system that protects him.”