Anomalies and Challenges of Progressive Income Taxation and its Effects on Inequality in Brazil

Abstract

This article seeks to analyze taxation on individual income in Brazil, its eventual progressive nature and its deficiencies, in addition to projecting its use as an instrument to reduce economic-social inequalities and poverty. To this end, the investigation seeks to identify problems in the Brazilian tax structure on income, such as soft marginal rates and unjustifiable tax benefits, which contradict CF/1988, and tries to point out some changes in this structure to achieve constitutional objectives and purposes. The research uses data made available by the Federal Revenue Service on the taxation of individuals and the review of specialized literature on the subject as a working method. It was found (1) that low progressivity and the granting of various tax benefits have produced extremely regressive effects, which contribute to accentuating inequality and the concentration of wealth among the wealthiest. Furthermore, (2) the implementation of some changes (such as increased rates, revocation of the total exemption on the distribution of dividends and other tax benefits), can return relative progressivity to the IRPF, also serving as a tool to reduce inequalities and remove people from extreme poverty.