Persona income tax: the impacts of the non-correction of the table used to collect the Personal Income Tax (IRPF) with the application of the Negative Income Tax (NIT) in Brazil

Abstract

The annual progressive table for personal income tax (imposto de renda da pessoa física [IRPF]) used by the government was last updated in 2015. However, according to technical study carried out by the tax auditors of the National Union of Tax Auditors of the Federal Revenue of Brazil (Sindicato Nacional dos Auditores Fiscais da Receita Federal do Brasil) (Sindifisco, 2020), considering the result of the broad consumer price index (índice de preços ao consumidor amplo [IPCA]), there was a 103.87% gap between the government table, which is not updated, and the table determined by the union. With the technical study of the IRPF table carried out by Sindifisco (2020), a criterion was established so that taxpayers who fit in the zero-rate income range received the negative income tax (imposto de renda negativo [IRN]), that is, the government should pay taxpayers in the zero-rate income level. Just as the payment of the IRPF is progressive according to the income of the taxpayer, the rate of the IRN program was also adopted in the same way, divided into income levels. In order to verify the monetary impact of the payment of the uncorrected table tax, an IRPF recalculation was carried out using information from taxpayers’ receipts (provided by the Aldib accounting office – assumed name), which generated the following result: the government would stop collecting BRL 3,427.85 per taxpayer. In addition, tax payers belonging to the income level with a zero rate were identified, and the IRN calculation criterion was applied. The impact for the government of the IRN program would be BRL 4,007.57 per taxpayer that meets the criteria of the benefit program. Therefore, analyzing this statistical assumption in relation to the government, it is possible to notice a decrease in the total collection of BRL 50.4 billion, and the government would disburse the total amount of BRL 67.6 billion.