The lag of the IR (Income Tax for Individuals) table in the government of Jair Bolsonaro (PL) reached a peak in the historical series started in 1996. In three years and three months, until March 2022, the lag during the current administration reached 24%.
So far, no other president has accumulated such a gap in a single term since the implementation of the Real Plan and the change in the calculation of the table, starting in January 1996. Before, in the years of uncontrolled inflation, the table was automatically readjusted by a indexer, the Ufir (Reference Tax Unit).
The survey was carried out by Sindifisco Nacional and measures the gap by presidential term considering the IPCA, the official inflation index measured by the IBGE (Brazilian Institute of Geography and Statistics).
The table is used to calculate the Income Tax discount for workers, retirees and other taxpayers. In it, there are the income ranges used for the calculation basis, with the respective rate and installment to be deducted. In practice, when it is not readjusted as inflation progresses, Brazilians pay more tax and the number of exempt taxpayers decreases, expanding the taxed population.
Today, those with an income of R$ 2,000, for example, are taxed at source in the range of 7.5%. However, if the table were readjusted according to the IR reform proposal, which is stalled in Congress, that person would be exempt.
Similarly, someone with an income of R$3,000 would be taxed at 7.5%, instead of the 15% currently levied. As a result, the tax payable would fall from R$95.20 to R$37.50, according to Sindifisco calculations.
Promoting the correction of the IR table was a commitment made by Bolsonaro during the 2018 election campaign, which has not yet been implemented. In recent weeks, both the president and the Minister of Economy, Paulo Guedes, have taken up the topic again, airing the possibility of making the correction in 2022.
In a recent interview with CNN, Bolsonaro said that the economic team is already studying a correction of the table in “very high percentage”. The government has the alternative of presenting the correction of the table in a provisional measure.
If it does not occur, the lag in Bolsonaro’s four-year term could reach 28%. The projection considers the estimate that this year inflation tends to accumulate a high of 6.86%, according to the average of projections of financial market analysts. However, the analysis area of some institutions already estimates inflation at 7% or even 8%.
The biggest gaps until then had been registered in the first and second terms of Fernando Henrique Cardoso (PSDB). There was a monetary argument at the time for holding the correction. In the late 1990s, the economic team worked to avoid price indexation, which would jeopardize the stability of the Plano Real from the very beginning.
In the first term, the gap was 17.19%. At the end of the second term, in 2002, already under the influence of the electoral campaign, the FHC government made a partial correction in the table, and ended that last term with a lag of 18.99%.
In his first term, Luiz Inácio Lula da Silva (PT) did not readjust. The lag in those four was 7.92%. However, between 2007 and 2014, PT management resorted to a law to make a fixed annual readjustment of 4.5% in the IR table.
Because of this expedient, the lag in Lula’s second term was 2.48%, the smallest in the series for a presidential term. In the first term of Dilma Rousseff (PT), it was 6.53%. Until impeachment, in 2016, the gap in Dilma’s second term totaled 4.80%. The last adjustment of the table took place in April 2015.
President Michel Temer also chose not to readjust the table. In his management, the gap totaled 13.52%.
Adding the lags of two consecutive terms, in the case of presidents who were reelected, FHC prevails as the record holder of losses for taxpayers. In his eight years of government, the gap reached 39.44%.
In the case of Lula, the lag was 10.6% in the accumulated of his two terms. From the first term to the impeachment, Dilma’s administrations accumulated a lag of 11.6%.
Considering the lack of readjustment of the table in all governments, from the date of change in January 1996 to March 2022, the lag in the correction of the table totals 142%.
The inflation of each period makes a big difference in the lag calculation. The higher the inflation, the greater the lag. Among tax experts, freezing the table has always been seen as a political strategy. Not correcting, in practice, means raising taxation without facing the wear and tear of promoting a tax increase.
The IR Reform bill, PL 2,337 of 2021, defended by Minister Paulo Guedes, provided for the correction of the table. The proposal had controversial items, such as taxation of profits and dividends. The text, in the absence of agreement, is stopped in the Chamber.
According to an estimate by Sindifisco Nacional, with R$ 10 billion, the government could adjust the table to the same constant values provided for in the bill, as of July 1 this year. By the simulations, more than 16 million salaried workers would be exempt. More than 30 million taxpayers would have relief from paying the tax.
The change, which would appear in the 2023 statement, would already be felt in the paycheck this year, as the amount collected at source would already be lower. Politically, the correction of the table, at this time of year, would be interpreted not as an economic policy, but a strategy to win votes.