Brazil’s government proposed R$12.6 billion in federal tax-debt relief for about 3.6 million one-person businesses on Tuesday, though Congress must approve the bill. The package also includes proposed grants, discounted purchases of bank debt and a higher revenue ceiling for micro-entrepreneurs.
President Luiz Inácio Lula da Silva announced the measures at the Planalto presidential palace in Brasília, ahead of the 25 October presidential runoff. Lula finished behind Flávio Bolsonaro in the first round and needs support from small entrepreneurs, a group where he polls weakly, InfoMoney reported. “We are going to help you get out of the squeeze,” Lula told entrepreneurs, according to the state news agency Agência Brasil.
Tax debts and the state
The main proposal would cancel federal tax debts owed by all MEIs, or microempreendedor individual businesses. MEI is a simplified tax status for one-person businesses that pay a small fixed monthly tax slip. About 3.6 million MEIs owe a combined R$12.6 billion, the Ministry of Entrepreneurship says. The debts stem from unpaid monthly tax slips, according to Exame, a Brazilian business magazine.
Finance Minister Dario Durigan said National Treasury attorneys collect the debts, often through court action. “The conclusion of the technical staff is that this is debt that is largely unrecoverable,” he said, according to Exame. The government said the direct cost of forgiveness could be below the headline amount because it considers much of the debt unrecoverable.
Congress hasn’t voted on the debt-relief bill. The government has urged lawmakers to act quickly but gave no date for a vote. Congress must approve debt forgiveness.
Grants, banks and business limits
The proposed one-off “Pix MEI” grant would offer up to R$5,000 per business for equipment and improvements. “It is not credit,” Entrepreneurship Minister Paulo Henrique Rodrigues Pereira said as he announced the scheme. Planning Minister Bruno Moretti put the cost at R$5 billion over four years, with a projected annual cost of about R$1.25 billion from 2027.
Electoral law bars the government from creating the grant program in 2026, so it could start in 2027 if Lula wins. Officials haven’t published eligibility and verification rules. The grant remains a proposal, not an available payment.
The government also plans to use its Desenrola 3.0 program to buy MEI debts from banks, requiring discounts of at least 90%. Durigan said the government would buy loans from creditors offering the largest discounts first. Reports differed on the size of the bank debts, and the government’s announcement gave no total for them.
Lula asked Congress to fast-track a bill that would raise the annual MEI revenue ceiling from R$81,000 to R$110,000 in 2027 and R$140,000 in 2028. The bill’s justification estimates that the higher ceiling would cost about R$8 billion over three years, Exame reported. A decree also confirms that MEIs don’t need to issue invoices on sales to private individuals.
Political stakes and financial exposure
Lula leads the left-wing Workers’ Party (PT) and is seeking a fourth term. His rival, Flávio Bolsonaro, is a conservative Liberal Party (PL) senator for Rio de Janeiro and the eldest son of Jair Bolsonaro. Brazilian outlets had reported no response from Flávio Bolsonaro to the package by Tuesday evening.
The report said pre-election spending promises can shape how investors judge Brazil’s public finances, the real and interest rates that drive Brazilian bonds and stocks. It also said small businesses that clear their tax records could regain access to credit, potentially benefiting one-person suppliers such as repair shops and street vendors. Those effects remain potential: the measures still depend on legislation, and officials haven’t published the proposed grant’s eligibility rules.