The government sent a bill to Congress to make the Budget more flexible and pave the way for the creation of a new social program. President Jair Bolsonaro’s (non-party) plan is to expand and reformulate Bolsa Família, which may even change its name.
The team led by Minister Paulo Guedes (Economy) wants changes in the taxation of the IR (Income Tax) to be used to fund the new income transfer program, which could be called Renda Cidadã or Renda Brasil.
As the change in the IR has not yet been approved by Congress, the government wants to make an adjustment in the LDO (law that provides the basis for the Budget) for 2021, before implementing the new Bolsa Família.
For this reason, a project to change the LDO was submitted so that the proposal for the creation of the new social program could provide for resources that are still under discussion by Congress.
When there is the creation of a new permanent expenditure (in the case of a social program), the government must compensate the measure with the increase in revenue. The economic team, therefore, is trying to take advantage of support for the new social program to implement one of the phases of Guedes’ tax reform — that of the Income Tax.
The government’s objective is to accelerate the debate on the reformulation of Bolsa Família.
On Wednesday (14), minister Paulo Guedes (Economy) stated that part of the revenue obtained by the government with the end of the exemption on dividends will be used to finance the expansion of the social program.
“[A tributação de dividendos é uma] very welcome source from a social justice point of view. Taxing the super-rich and financing the tax reduction for salaried workers and strengthening Bolsa Família”, he affirmed.
Former mayor of the Chamber, Deputy Rodrigo Maia (DEM-RJ) called this “creative accounting”.
Chamber Budget consultant Ricardo Volpe says that the strategy does not constitute a fraud to the LRF (Fiscal Responsibility Law), but needs to be treated with caution.
“The important thing is that there is compensation. What cannot be the approval of the new Bolsa Família without approving the other project”, he said.
In addition to requiring the indication of compensation for the new expenditure, the LRF establishes that the new continued expenditure proposed by the government will only be executed after the effective implementation of the measure that increases revenue or cuts expenditure by an equivalent amount.
With an eye on 2022, Bolsonaro’s allies believe that increased spending in the social area could regain the president’s popularity.
The new program is still under development. The idea is to raise the average benefit per family from the current R$190 monthly to something close to R$270.
The number of beneficiaries is also expected to increase, from 14.7 million families to approximately 17 million.
As a result, the cost of the program tends to rise to more than R$50 billion per year. In the 2021 Budget, the budget for Bolsa Família is R$34.9 billion.