Bolsonaro raises tax to support the new Bolsa Família

The president Jair Bolsonaro (no party) issued a decree to change the rates of the IOF (Tax on Credit, Exchange and Insurance Transactions, or those relating to Bonds or Securities) related to credit transactions for legal and natural persons. The new rates will be valid in the period between September 20, 2021 and December 31, 2021. The Ministry of Economy was asked about the value of the rates, but has not yet responded.

The government’s expectation is that the measure should generate an increase in collection estimated at R$ 2.14 billion. In practice, this increase will help to fund the increase in the amount allocated to Auxílio Brasil, a new income transfer program that should replace Bolsa Família, whose new value will come into effect in 2021. About 17 million families should be benefited — today there are 14.6 million.

The new social program is one of the government’s bets to improve President Bolsonaro’s popularity rating —today, according to Datafolha, Bolsonaro registers 53% rejection, the record since the beginning of his term.

A alteration of the IOF should also allow for an increase in the import quota for goods destined to Science and Technology, which will enable the continuation of scientific and technological research in progress in the country. The measure will make feasible, in particular, the research, development and production projects of vaccines for coronavirus in progress at FioCruz and the Butantã Institute, which, today, are the main beneficiaries of this tax regime.

The measure will also allow the reduction to zero of the Pis/Cofins Social Contribution rate levied on corn imports, which should have positive effects on the cost of food.

As it is a decree, the changes to the IOF will take effect immediately and do not depend on the approval of the National Congress. The effective increase in Brazil Aid, in turn, will still depend on a specific legislative measure. The change in the import quota for science and technology goods and for corn imports will be implemented directly by the bodies of the Ministry of Economy.

Controversy of court orders

Earlier this month, the Special Secretary for Treasury and Budget of the Ministry of Economy, Bruno Funchal, even said that the size of the readjustment that could be granted to Auxílio Brasil would depend a lot on the solution found to the question of precatories — which are debts recognized by the Court and that the government is obliged to pay. He recalled that the proposal sent to the Committee on Constitution and Justice (CCJ) was the permanent installment rule.

“Now, with the creation of a sub-ceiling, with a specific budget for court orders, it opens up more space [para um reajuste]”he considered.

Regardless of the solution found, according to the secretary, it is necessary to emphasize that for an increase of every 1 percentage point (pp) of the National Consumer Price Index (INPC), there is a pressure of R$ 8.5 billion on expenses discretionary.

Brazil x Family Grant

There is still no definition of the amount to be paid for the new Brazil Aid, but the provisional measure (MP) that created the program determines that the same payment between the two benefits is guaranteed.

Whoever starts to receive less than the Bolsa Família will receive the compensatory transition benefit. Read below what is known so far about its operation and who has the right and who is not.

What is the Transition Benefit?

It is an amount that will be paid to the families who will lose money with the change from Bolsa Família to Auxílio Brasil.

How does the offsetting benefit work?

The provisional measure determines that the payment is equal to what was not received.

Example: if a family earns BRL 200 from Bolsa Família, and is entitled to only BRL 100, including all the benefits that are part of Auxílio Brasil, it is entitled to the compensatory transition benefit and should receive another BRL 100 to complete the amount you received before.

Brazil x Family Grant

There is still no definition of the amount to be paid for the new Brazil Aid, but the provisional measure (MP) that created the program determines that the same payment between the two benefits is guaranteed.

Whoever starts to receive less than the Bolsa Família will receive the compensatory transition benefit. Read below what is known so far about its operation and who has the right or not

Who will not be entitled to the benefit?

According to the government, only families that have a reduction in the number of members (due to someone’s death, children who left home, etc.) will not receive the compensatory benefit.

Will the benefit amount always be the same?

In the Auxílio Brasil rules detailed in the MP, no. The amounts can be gradually reduced, and even ended, if the social programs linked to the new Bolsa Família start to pay the same amounts that were previously given.

Thus, a family will be entitled to the compensatory benefit until the amount received at the time of Bolsa Família is recomposed by other social programs, if this is possible.

Another way to reduce or increase the value of the transition benefit is through data review, also provided for in the provisional measure.

Auxílio Brasil will consist of three main benefits: early childhood (for families with children between zero and 36 months); family composition (for families with pregnant women or people aged between 3 and 21 years old) and overcoming extreme poverty (families with a monthly income of up to R$89 per person).

How long will the compensatory benefit be paid?

There is no set limit.

The text of the program only explains that the benefit will be terminated if the family fails to meet the requirements to be part of Auxílio Brasil.

When does the compensatory benefit start to be paid?

According to the text of the MP, in the month of implementation of Auxílio Brasil, estimated for November.

The amount received by the family in July (the month before the publication of the MP do Auxílio Brasil) will be used as a parameter to know if the family will receive the compensatory benefit.

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