Reflections on proposals for reform of the Individual Income Tax (IIT) in Brazil

Abstract

This article assesses the state of the art in proposals for reforming the Individual Income Tax (IIT) in Brazil. Various discussions and proposals have been presented over the past years. The discussion regarding changes to the IIT regained momentum after the government introduced a proposal for consumption-based tax reform, leading to subsequent discussions in the House of Representatives and the Senate. Economic agents' expectation is that the next step will involve presenting a proposal for income tax reform. The purpose of this article is to discuss proposed changes in the design of the Individual Income Tax in Brazil by reviewing specialized literature and shedding light on these modifications. Thus, the article aims to evaluate three recurring questions in the IIT reform discussion: progressiveness and/or regressiveness; tax brackets, their corresponding rates, and legal deductions for medical expenses; and the taxation of profits, dividends, and investment funds.