The EU Tax Observatory at the Paris School of Economics, in collaboration with Brazil’s Ministry of Finance, has released a report indicating that inequality in Brazil is significantly higher than previously estimated. This finding results from the inclusion of new data.
For instance, the report calculates that the top 1% of earners control 27.4% of total income, which is 7.1 percentage points higher than the most recent estimate by the Brazilian government.
“This places Brazil among the most unequal countries in the world,” stated economist Gabriel Zucman, one of the authors of the study, during a press conference.
The report attributes the substantial discrepancy to the concentration of business profits, which are “far more concentrated” than directly observable income sources, such as wages.
Moreover, the situation is exacerbated by the regressive tax system. Brazil is one of the few countries globally that exempts dividends distributed by companies to their shareholders from taxes, disproportionately benefiting the wealthiest individuals.
In this context, the report notes that the top 0.01%, with an annual income exceeding one million dollars, pay 20.6% in taxes, compared to an average of 42.5% for the broader population.
One “fundamental novelty” of the study, according to Zucman, is the consideration of all taxes, including those paid by companies owned by the ultra-rich, providing a more comprehensive view of inequality.
To address this issue, President Lula da Silva’s government is promoting an income tax reform that exempts those earning less than 5,000 reais (780 euros) per month from taxation while establishing a minimum payment of up to 10% for the wealthiest individuals.
The House of Representatives is currently examining the proposal, with a vote expected in the coming weeks. Some opposition is anticipated from the political right.
