The Brazilian Senate approved a bill outlining measures to offset the effects of the payroll tax exemption, a key step toward resolving a months-long struggle between Congress and the administration of President Luiz Inácio Lula da Silva, according to Reuters.
The final version of the bill did not include a proposal to raise taxes on so-called “interest on equity” payments as that part of the text was withdrawn before the vote.
Last year, Congress approved a bill aimed at extending the payroll tax exemption for 17 labour sectors until 2027. However, Lula vetoed the measure only to have lawmakers override it again.
The government then got Brazil’s highest court to suspend the law expanding the tax exemption, as the Lula administration argued that Congress needed to propose measures to compensate for lost revenue.
The bill passed on Tuesday after months of negotiations between the government and lawmakers kept the payroll tax waiver in place until the end of the year, while gradually reducing it from 2025 to 2027. Among the measures governed by the bill are government programmes aimed at renegotiating companies’ debts with state regulators and repatriating resources held overseas.
The bill will now go to the lower house for a vote, after which it will need Lula’s approval to become law.
