In a politically charged week in Brasília, key economic and judicial developments reshaped Brazil’s landscape. The Senate approved an income tax reform granting exemption for those earning up to R$5,000 per month and introducing a 10% minimum tax on high incomes, expected to inject up to R$28 billion into the economy by 2026. Meanwhile, the Supreme Federal Court unanimously rejected former president Jair Bolsonaro’s appeal in the coup plot case, moving him closer to serving a 27-year prison sentence. Adding to the political tension, Chamber President Hugo Motta appointed São Paulo’s Security Secretary Guilherme Derrite as rapporteur for the anti-gang bill—an unexpected setback for the Lula administration amid ongoing friction with Congress.
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Income Tax Exemption
On Wednesday (05), the Senate approved the exemption from Income Tax for those earning up to R$ 5,000 per month. In addition to the exemption, the bill provides for a progressive discount on Income Tax for taxpayers who receive between R$5,000 and R$7,350 per month.
To compensate for the loss of revenue with the change, the proposal creates a minimum effective tax of 10% on high incomes. The target of the measure is 141,000 taxpayers who pay, on average, an effective rate of 2.5%. A “minimum tax” will be progressively levied on those earning R$50,000 per month whenever the regular tax rate falls below the established minimum. The minimum rate of 10% applies to incomes starting at R$1.2 million per year.
According to calculations by Arthur Lira (PP-AL), the bill’s rapporteur in the Chamber of Deputies, the exemption would cost R$31.2 billion next year. The loss of revenue will be compensated by the minimum tax on high incomes and the 10% withholding tax on profits and dividends received by residents or those domiciled abroad.
Economic Boost
The approval in Congress of the government’s proposal to increase the income tax exemption threshold for those earning up to R$5,000 per month and reduce taxation on salaries up to R$7,350 will provide considerable relief to the pockets of middle-class taxpayers, boosting consumption and, consequently, economic growth. According to estimates by economists, the measure sent by the Senate to President Lula for approval last week could inject between R$20 billion and R$28 billion into the economy in 2026, when it comes into effect.
Appeals Rejected
On Friday (7), the First Panel of the Supreme Federal Court (STF) unanimously rejected the appeal of former president Jair Bolsonaro (PL) and the other defendants in the central core of the coup plot against the conviction imposed on them by the panel. The judgment of the appeals marks the beginning of a new phase in the process against the former president and former aides. The action is expected to be concluded in December — with the start of the sentences in 2025. The location of Bolsonaro’s eventual imprisonment in a closed regime is still unknown. Walter Braga Netto (former Minister of the Civil House), Almir Garnier Santos (former head of the Navy), Paulo Sérgio Nogueira (former Minister of Defense), Alexandre Ramagem (former director of Abin and federal deputy), Augusto Heleno (former Minister of the GSI) and Anderson Torres (former Minister of Justice) also had their requests rejected.
Anti-Gang Bill
Federal Chamber President Hugo Motta (Republicanos-PB) announced the Secretary of Security for the Tarcísio de Freitas administration in São Paulo, Guilherme Derrite (PP-SP), as the rapporteur for the anti-gang bill sent by the Ministry of Justice to Congress. The choice was a defeat for the Federal Government and further disturbed the relationship between Hugo Motta (Republicanos-PB) and the PT administration. Motta had been making gestures towards the President of the Republic. He participated in government events, helped in the approval of projects of interest to the Executive branch, and acted in negotiations with centrist parties.
The announcement generated displeasure among members of the government and parliamentarians from the allied base. This is because the tendency is for Derrite to include in the original text the equation of criminal organizations with terrorism, a measure that has become a banner of the right and is criticized by the government.
Analysis:
The Supreme Court’s rejection of Jair Bolsonaro’s appeal in the coup plot case reinforces judicial authority but heightens polarization, with potential for unrest among radical supporters. As Bolsonaro nears imprisonment, security forces may face renewed mobilization attempts and institutional tension among branches of government.
The appointment of São Paulo Security Secretary Guilherme Derrite as rapporteur of the anti-gang bill deepens rifts between Congress and the federal government. His expected proposal to classify organized crime as terrorism could expand police powers and blur lines between criminal and political threats, heightening risks of abuse and conflict in marginalized areas.
Meanwhile, the income tax reform aims to boost consumption and economic stability, but also serves political purposes amid fiscal pressures. Together, these developments highlight Brazil’s fragile equilibrium—judicial assertiveness, legislative friction, and economic maneuvering converging in a climate of polarization and institutional uncertainty.
Sources: A Folha de SP [1], [2], [3], [4], [5], [6], [7], [8], [9], [10], [11], [12]; G1 [1], [2]; O Globo.
