Brazil’s lower house of Congress voted on Wednesday to expand income tax exemptions for the middle class, despite resistance from investors.
The bill, which still requires Senate approval, would exempt around 16 million Brazilians from paying income tax, according to government estimates.
It broadens eligibility for tax exemption to those earning up to 5,000 reais (£740) per month, compared with the current threshold of 3,000 reais.
Lawmakers adopted the bill unanimously, with backing even from the opposition led by the party of far-right former president Jair Bolsonaro.
To compensate for the expected loss in revenue, the legislation proposes higher taxes on top earners. Currently, individuals earning more than 50,000 reais per month pay an average income tax rate of 2.5 per cent. Under the new measure, that rate would gradually rise to 10 per cent.
The bill enjoys strong support among President Luiz Inácio Lula da Silva’s left-wing base. However, its initial announcement last year, alongside plans for spending cuts, unsettled financial markets and caused a historic depreciation of the national currency.
Arthur Lira, the bill’s sponsor, said the measure would deliver “tax justice” for “those who earn the least.”
Lula has indicated he may seek re-election next year.