Workers Over R$ 6 Thousand Pay More Tax

Income Tax is a central theme in discussions about tax justice in Brazil, especially when observing the disparity in the rates that different social groups pay.

This article explores the differences in effective income tax rates between workers and millionaires in 2024, revealing that those with lower incomes often face a heavier tax burden.

The analysis includes the tax exemption that benefits the wealthiest and the challenges that remain in the Brazilian tax structure, as well as the impact of the tax reform approved in 2023, which aims to change this unequal scenario.

Inequality in Effective Income Tax Rates in 2024

A recent study reveals a striking discrepancy in effective income tax rates in Brazil in 2024, highlighting that workers with incomes above R$1,000 per month pay more taxes than millionaires.

This analysis is based on the study of National Union of Federal Revenue Auditors, which points out that millionaires face an average tax rate of just 5,28%, a rate lower than that faced by most workers.

In comparison, those earning between five and seven minimum wages face a tax burden of 6,63%.

This percentage grows significantly for 11,40% when income is between R$ 19,800 and R$ 26,400. This inequality derives from tax privileges that exempt a large part of the income of the richest, especially profits and dividends.

With the recent 2023 tax reform aiming to correct this injustice, the discussion now focuses on the fair application of taxation and the need for future reforms for a more equitable distribution.

This leads to the question of exemption structures and how they affect different income brackets.

Income Ranges, Salaries and Tax Rates

In 2024, the Income Tax panorama in Brazil reveals significant challenges regarding tax justice.

Income brackets vary widely, with workers in different pay groups facing different effective tax rates.

These rates are often disproportionate, exacerbating economic disparities.

Below, a table details the income brackets and their respective tax rates.

This fiscal situation complicates the reality of many Brazilians, mainly those with incomes between R$ 19,800 and R$ 26,400, who face the most onerous tax rate.

This occurs while millionaires benefit from tax mechanisms, such as exemptions on profits and dividends, which recent tax reforms try to correct.

Composition of the Exempt Income of the Richest

In the year 2024, an in-depth analysis of the income composition of millionaires in Brazil reveals that a significant portion, of 35%, is tax-exempt, generating a considerable impact on the tax system.

This exemption comes mainly from profits and dividends, which are the main components of the exempt income of the wealthiest.

This tax protection results in an impressive absolute value of R$ 700 billion in untaxed income, as highlighted in recent research.

This tax disparity sparks a debate on urgent reforms in tax legislation.

• Profits and Dividends
• Financial Income
• Other Applicable Exemptions

This scenario challenges government policies to implement changes that increase fiscal equity and reduce inequality in the current system.

2023 Tax Reform: What Changes and What's Missing

The 2023 tax reform brought significant changes to taxation in Brazil.

One of the main highlights was the increase in the Income Tax exemption bracket, benefiting low-income workers by reducing your tax burden.

Furthermore, the reform proposed the taxation of profits and dividends, seeking to equalize the contribution of the richest to that of those with lower incomes.

With these changes, the government aims to reduce fiscal inequalities in the country, making the tax structure fairer and more progressive.

According to the website Farm Study, the effective tax rate for the richest should increase considerably, which represents an important step towards tax justice.

On the other hand, experts point out that the reform represents only a partial correction of existing inequalities.

Despite the progress, there is criticism that the changes still do not comprehensively address all distortions in the tax system.

Resistance to the full approval of dividend taxation, for example, limits the expected impact on reducing social and economic inequalities.

The consensus among analysts is that additional improvements are necessary for the Brazilian tax system to become truly progressive and equitable, promoting a more consistent and effective redistribution of income.

Thus, while the 2023 reform represents an important step, there is still a way to go to achieve effective tax justice.

Income Tax is, therefore, a reflection of social and economic inequalities in Brazil.

The proposed reforms represent a step in the right direction, but there is still much to be done to ensure a fairer and more balanced tax system.