Brazilian presidential candidate Flavio Bolsonaro has pledged to reconsider several tax measures introduced or advanced during President Luiz Inacio Lula da Silva’s administration, arguing that the country’s evolving tax system could leave households and businesses facing an excessive burden.
Speaking in Brasilia on October 7, Bolsonaro said his campaign was examining possible constitutional amendments affecting parts of Brazil’s consumption-tax overhaul. He also indicated that reducing payroll taxes would be among his priorities if elected.
The proposals come ahead of Brazil’s October 25 presidential runoff, in which Bolsonaro will face incumbent President Lula. Bolsonaro finished slightly ahead of Lula in the first round, according to Reuters.
Bolsonaro Questions Brazil’s New Consumption-Tax Structure
Brazil has been undertaking a major restructuring of its consumption-tax system. The reform approved under Lula is designed to consolidate several existing levies into a dual value-added tax structure administered at federal and regional levels.
The new framework is scheduled to begin taking effect next year. Bolsonaro has said he supports simplifying Brazil’s complicated tax system but believes the effective VAT rate could become too high.
Economists have estimated the eventual rate at around 28%, although the final rate has not yet been determined by the government. Bolsonaro has argued that changes should be considered to prevent the reformed system from placing an excessive burden on taxpayers.
Dividend and Financial Transaction Taxes Also Under Review
Bolsonaro’s economic team has indicated that the proposed review would extend beyond the consumption-tax overhaul.
Daniella Marques, a senior economic adviser to the campaign and former official in Jair Bolsonaro’s administration, said a Bolsonaro government would examine several tax measures introduced under Lula.
One area under consideration is the dividend tax that came into effect in January. Bolsonaro’s team has also proposed reversing increases in the Financial Transactions Tax, known as IOF, affecting areas such as corporate credit, foreign-exchange transactions and certain private pension investments.
The proposals reflect a broader campaign position favouring lower taxes on income and economic activity. Bolsonaro has also called for reductions in payroll taxes, saying workers should retain more of their earnings.
Proposal to Remove Crude Oil Export Tax
Another measure targeted by Bolsonaro’s campaign is the 12% tax on crude oil exports introduced by Lula’s government this year.
Marques described the levy negatively and said a Bolsonaro administration would seek to eliminate it. The tax was introduced as part of measures intended to help finance fuel-tax relief during a period of elevated global oil prices.
The debate over the levy comes as Brazil continues to navigate the economic effects of higher energy costs and wider geopolitical tensions affecting global oil markets.
Different Tax Priorities from Lula’s Campaign
Lula’s campaign has presented a different approach to tax policy, placing greater emphasis on what it describes as tax justice and reducing inequality.
His platform supports implementing the consumption-tax reform already approved by his administration while seeking to reduce tax distortions, privileges and inefficient tax incentives.
Lula’s administration has also used dividend taxation as part of a broader package that includes tax relief for higher-income workers in the middle-income range.
The contrasting proposals mean taxation is emerging as an important economic policy issue in the final phase of Brazil’s presidential campaign. Businesses and investors are likely to watch closely how either administration would alter the existing tax framework and its implications for investment, consumption and government revenue.
Household Debt Becomes Another Campaign Issue
Tax policy is not the only economic issue being discussed by Bolsonaro.
With Brazilian household debt remaining a major concern, he has proposed that the government purchase debts held by heavily indebted consumers and refinance them through state-owned Caixa Economica Federal.
He has also proposed new credit lines aimed at helping borrowers finance small businesses.
Lula has separately promoted a debt-relief initiative. The government has announced plans for a November auction involving up to 150 billion reais in delinquent household loans, with the state expected to spend 15 billion reais to acquire the debt at substantial discounts.
The programme is intended to allow eligible households to settle overdue obligations at reduced values.
What the Tax Proposals Could Mean
If Bolsonaro wins the October 25 runoff, his proposals could lead to a review of several elements of Brazil’s tax framework, although significant changes would depend on legislative and constitutional processes.
For companies operating across borders, changes to consumption taxes, dividends, financial transactions and energy-related taxation could have implications for compliance and international tax planning. Businesses will therefore need to monitor the eventual policy details rather than rely solely on campaign proposals.
For companies and investors dealing with cross-border structures, International Tax considerations could become particularly relevant if Brazil changes the treatment of corporate income, dividends or international transactions.
At this stage, Bolsonaro’s proposals remain campaign commitments rather than enacted policy. The final direction of Brazil’s tax system will depend on the election result, subsequent legislative action and the implementation of any proposed reforms.