On November 29, 2024, the Brazilian real fell to historic lows as the dollar reached 6 reais for the first time, driven by investor scrutiny of the government's proposed tax reform package. The Ibovespa, Brazil's main stock index, also experienced declines.
Finance Minister Fernando Haddad, alongside Planning Minister Simone Tebet and Civil House Minister Rui Costa, held a press conference to clarify details of the tax reform announced the previous day. Haddad emphasized that the reform aims to expand income tax exemptions for individuals earning up to 5,000 reais (approximately 840 USD) monthly, a campaign promise from President Luiz Inácio Lula da Silva.
Currently, only those earning up to 2,259.20 reais (around 380 USD) are exempt from income tax. Haddad projected a fiscal impact of 35 billion reais (approximately 5.87 billion USD) annually from the reform, countering market speculation of a 70 billion reais (around 11.37 billion USD) loss.
To offset the revenue loss, the government plans to increase taxes on wealthier individuals, specifically targeting those earning over 50,000 reais (about 8,383 USD) per month, who currently benefit from exemptions on income derived from rents, interests, or dividends. These individuals will face a 10% tax on their total income.
Additionally, Haddad assured that those earning over 20,000 reais (around 3,353 USD) monthly will continue to deduct health expenses but will no longer be exempt from income tax. The reform has been under review for over a year and is expected to be presented to Congress soon for approval by mid-2025, with implementation slated for January 2026.
Haddad's statements aimed to clarify misinformation that led to market turbulence, which had previously driven the dollar's value to 5.91 reais, its highest level to date.