Chamber of Deputies puts pressure on Lula's government and approves urgency for project that overturns IOF increase

The Chamber of Deputies approved this Monday, the 16th, an urgent request for the legislative decree project (PDL) to overturn the decree that increases the Tax on Financial Transactions (IOF) , published by the Lula government. By 346 votes to 97, the deputies decided to speed up the processing of the text, presented under the narrative that the House does not "accept more tax increases without spending cuts".

The urgency request is an instrument that speeds up the processing of a proposal in the plenary of the House, without needing to go through committees.

Early in the evening, the President of the Chamber, Hugo Motta (Republicans-PB), indicated that the vote on the urgency of the PDL was "very symbolic about the feeling of the House" and repeated that "there is an exhaustion of measures that seek to increase revenue".

The statement came after a meeting held in the afternoon at the official residence of the Speaker of the Chamber, to discuss the IOF and other issues, such as parliamentary amendments and the relationship with the government.

According to Motta, no deadline was given for the government to present new alternatives to the IOF, nor was there any indication from the Executive regarding the withdrawal of the text. The approval of the text on Monday, the 16th, comes amid dissatisfaction in the Chamber with the government due to an alleged delay in the budget execution of parliamentary amendments.

There is also an argument that the previous decree has already been repealed and would not be valid again if the text published this Wednesday, the 11th, is suspended. This invokes the "reinstatement", which is included in the Law of Introduction to the Norms of Brazilian Law. According to the law, the "repealed law is not restored because the repealing law has lost its validity, unless otherwise provided". In other words, the previous decree would not be restored if the current one were repealed.

Such hypotheses should only be confirmed with the appointment of a rapporteur for the PDL. In any case, a possible overturning of the IOF decree would not have a direct consequence on the alternative Provisional Measure to the tax (read more below) - the texts are independent.

The government would have to find new ways to collect the revenue expected from the IOF. The official revenue estimate for 2025 has not yet been released, but Finance Minister Fernando Haddad has already indicated that the gain from the decree would be around R$6.3 billion (equivalent to one third of the revenue projection from the initial decree).

IOF shuttle

The impasse surrounding the increase in the IOF has already resulted in three different government decrees on the subject. The first was published on May 22, when the Executive Branch increased the IOF rate for companies, private pension plans and foreign exchange transactions. After pressure from the financial sector, on the same day, the government backtracked and gave up on taxing Brazilian funds invested abroad, publishing a new decree.

After the first retreat, the Minister of Finance, Fernando Haddad, met with the presidents of the Chamber of Deputies, Hugo Motta, and the Senate, Davi Alcolumbre (União-AP), on Sunday, June 8, to discuss measures to compensate for the increase in the IOF.

On Wednesday the 11th, the minister went to the Chamber of Deputies to discuss public accounts in a hearing, but left the meeting after an argument with opposition members of parliament . On the same night, the government published a new decree with further cuts in the IOF and a provisional measure (MP) with alternative compensation measures.

The proposals include increasing the taxation of bets and charging Income Tax on incentivized securities , previously exempt from IR, such as LCI and LCA.

Despite the attempt at dialogue, the reactions against the Executive Branch's proposal only increased. The Speaker of the Chamber criticized the government for proposing tax increases.

"Any solution that brings about an increase in taxes, without the government doing the minimum homework in terms of cutting spending, will not be well accepted by the productive sector, nor by the Legislative Branch," said Motta last Wednesday.

The day after the publication of the new measures, the parliamentarian came out again and announced that he would urgently schedule a legislative decree project (PDL) to overturn the government decree.

Lawmakers criticize Haddad for adopting measures without first negotiating with Congress and proposing measures aimed at increasing revenue. The reaction comes amid the lack of payment of parliamentary amendments, which disrupts the minister's agenda in Congress.