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The project was originally proposed ten years ago. It is currently under review in the Chamber of Deputies, and the expectation is that it will be forwarded to the Senate later this week.
The tax reform process is still awaiting deliberation in the Chamber of Deputies, possibly reaching the Senate only in the second half of 2023. However, government members are trying to establish agreements to accelerate this stage. One of the proposed changes involves introducing a new policy aimed at reimbursing taxes paid by low-income citizens, in a strategy similar to cashback.
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When a consumer purchases a product, the responsible company returns a portion of the amount, with the purpose of encouraging them to buy more items from the same brand. This initiative, known as “people’s cashback” and developed by the Ministry of Finance, aims to return the amount to individuals.
Reducing Inequality
As a result, low-income people would have fewer taxes directed toward the middle and upper classes. Additionally, all segments of the population would benefit from this strategy, since the increase in federal revenue would result in investments in public infrastructure, such as the construction of schools, for example, based on the number of consumers, not the price of the product.
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“Does this mean that the wealthiest will be affected? No, they will simply benefit less than the poorest,” declares Bernard Appy, Secretary of Tax Reform at the Ministry of Finance.
Given that the proposal affects the interests of all sectors of the economy, it faces obstacles. Although the government is discussing this plan only now, the Inter-American Development Bank (IDB) had already suggested this idea ten years ago. The main objective is to reduce the benefits offered by the current tax system, especially for the wealthiest.
Approval of the Proposal
They have already incorporated the strategy into Proposed Constitutional Amendment (PEC) No. 45. During the analysis of the Tax Reform, scheduled to take place only next year, there will be a debate on tax cashback. However, the president of the Chamber of Deputies, Arthur Lira, plans to vote on the proposal in the House by the end of this week. Once the text is finalized, they will announce the beneficiaries and the amounts they may receive back.
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