Originally published in the April 9 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Brazilian Workers’ Party President Mauricio Rands recently summarized the party’s proposal to create a large fortune tax (imposto sobre grandes fortunas, or IGF), which would levy a new tax on some of Brazil’s wealthiest taxpayers. The Workers’ Party will propose an amendment to create the IGF as soon as the tax reform bill (Constitutional Amendment Project (PEC) No. 233/2008) reaches the House tax reform special commission, Rands said April 2.
Rands detailed the party’s proposal for the creation of IGF as follows: A large fortune, for purposes of the IGF, would be the taxpayer’s net assets in excess of 8,000 times the personal income tax exemption bracket, currently at BRL 1,372.81 (approximately $808). This means taxpayers with more than BRL 10.98 million (approximately $6.46 million) in net assets would be subject to the IGF.
The party proposes three progressive rates:
- 0.5 percent from 8,000 through 25,000 times the exempt bracket, or BRL 10.98 million (approximately $6.46 million) through BRL 34.32 million (approximately $20.20 million);
- 0.75 percent from above 25,000 through 75,000 times the exempt bracket, or BRL 34.32 million (approximately $20.20 million) through BRL 102.96 million (approximately $60.59 million); and
- 1 percent for net assets above 75,000 times the exempt bracket.
The following assets would be excluded from the IGF tax base:
- the property where the taxpayer resides;
- instruments and equipment used in the taxpayer’s business activities;
- works of art and collections;
- intellectual property rights; and
- items of small value as provided in regulations to be issued by the executive branch.
The Workers’ Party estimates that the IGF could generate approximately BRL 5 billion (approximately $2.94 billion) every year, reaching about 10,000 wealthy families in the country. Five thousand Brazilian families hold assets equivalent to 40 percent of Brazil’s GDP, according to Rand.
The party plans to make the IGF a tax earmarked for social security.
David Roberto R. Soares da Silva