(Reuters) – Brazilian Senate leader Rodrigo Pacheco said on Friday the government would revoke a proposal it made to phase out the extension of payroll tax exemptions for various labor sectors, yielding to the will of the lawmakers on the matter.
Speaking at a Lide Group event in Switzerland, Pacheco said that payroll tax exemption for 17 sectors of the economy until 2027 would remain.
“The exemption will stand, and there is a commitment from the federal government to…revoke this provisional measure in the part that concerns the payroll exemption,” Pacheco said during a panel session at the event in Zurich.
“That’s the political commitment we’ve made and that’s the way things are going to go.”
At the end of 2023, the government introduced an executive order featuring a set of measures to restrict tax benefits across various sectors and ensure fiscal compensation, as it aims to eliminate the primary budget deficit this year.
The executive order was intended to replace the text of an approved bill that President Luiz Inacio Lula da Silva vetoed, just to have it overturned by Congress in mid-December.
Lawmakers voted to extend payroll tax exemptions for 17 labor sectors until 2027, with an impact of 12 billion reais ($2.44 billion) that had not yet been incorporated into the 2024 budget.
The government package, which met with immediate political opposition, proposed reducing and gradually phasing out these benefits.
($1 = 4.9253 reais)
(Reporting by Eduardo Simões; Writing by Steven Grattan, Kirsten Donovan)
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