Motta: Government to Present Proposal to Compensate IOF Losses; Tax Exemptions to Follow Later

The President of the Chamber of Deputies, Hugo Motta (Republicanos-PB), stated on Thursday that the government should present a proposal to compensate for the revenue losses caused by the expiration of the measure that was designed as an alternative to the increase in the Financial Operations Tax (IOF) by next week. The measure was part of the fiscal actions taken by the Ministry of Finance to restore revenues and balance public accounts but expired without being voted on by Congress.
According to Motta, the Chamber’s priority at the moment will be to advance proposals for spending cuts. Therefore, the proposal to review tax exemptions will be postponed to a second stage.
“The government is deciding on the vehicle it will use to address the issue of replacing what was lost in MP 1303 (the alternative measure to the IOF). The government is expected to present its solution by next week. We also want to make progress on the linear cut in tax exemptions,” said the President of the Chamber.
Following the fall of the measure, Finance Minister Fernando Haddad’s team is working on a new fiscal package divided into two fronts: one focused on reducing expenses and the other on restoring revenues. The strategy aims to avoid concentrating measures in a single text, which had faced resistance during the original measure’s processing.
The cost-cutting plan is expected to generate savings between R$15 billion and R$20 billion, while the revenue increase includes the taxation of bets and fintechs, with the potential to generate around R$3.2 billion as early as 2026. In this initial phase, the Treasury also decided to preserve exemptions for investments in products such as LCI and LCA to reduce friction with the financial sector and Congress.
The new package is considered a priority by the economic team, which aims to restore the estimated revenue of R$34.5 billion for 2026 lost with the expiration of MP 1303, and ensure the compliance with the primary surplus target of 0.25% of GDP.
Behind the scenes, government allies are considering incorporating some measures into projects already in progress to expedite the voting process.
The government leader in the Chamber, José Guimarães (PT-CE), mentioned two texts under discussion as possible vehicles: one that classifies the counterfeiting of beverages as a heinous crime and another that establishes the Special Regime for Property Updating and Regularization (Rearp), focused on updating property values.