Senate Extends Income Tax Exemption, President Bolsonaro: Otherwise We Will Have Mass Unemployment

Illustration of factory workers in Brazil. (Wikimedia Commons/Marcio De Assis)

JAKARTA - Brazil's Senate on Thursday approved the extension of payroll tax exemptions for 17 sectors of the economy until December 2023, a move deemed necessary to save jobs during a period of stagnant growth caused by the coronavirus pandemic.

The bill has already passed the lower house of Congress and advanced to President Jair Bolsonaro for signature into law.

"If it is not approved, we will have mass unemployment," President Bolsonaro said praising the agreement, citing Reuters December 10.

Earlier, President Bolsonar proposed an extension of the tax a month ago, sacrificing government revenue to avoid exacerbating double-digit unemployment.

These exceptions cover many of the most labor-intensive sectors, such as civil construction, textile and footwear manufacturers, transport and communications companies. Many businesses are threatening layoffs if the exemption, first granted in 2014, is allowed to expire at the end of 2021.

The latest government data shows the country saw a record number of citizens out of the workforce completely and an unemployment rate of 13.2 percent in the three months to August.

To note, Economy Minister Paulo Guedes and his team, struggling to find fiscal resources to avoid deepening Brazil's budget deficit, rejected an extension that is expected to cost at least 8 billion reais or about 1.48 billion US dollars per year.