Brazilian fiscal and tax policy developments

The Brazilian Federal Revenue reported a historic total of over R$ 41 billion in income tax refunds for 2026, benefiting nearly 26 million citizens. This process included an IRPF cashback system and educational initiatives like ‘Projeto Cartas’ to help taxpayers rectify errors before formal audits.

Concurrently, municipal governments are facing financial uncertainty stemming from national tax reform and declining federal transfers. A study by CEDEPLAR/UFMG, commissioned by the Brazilian Association of Mining Municipalities (AMIG Brasil), indicates that the 30 largest mining municipalities could see a combined revenue loss of over R$ 2 billion. This decline is attributed to a shift in distribution criteria for the new Goods and Services Tax (IBS), which will place greater emphasis on population size rather than local economic production.

In Mato Grosso, the Association of Mato Grosso Municipalities (AMM) has warned that smaller municipalities with high productive capacity but low populations may suffer as tax distribution shifts toward consumption-based models. These structural concerns are compounded by declines in the Municipal Participation Fund (FPM). Official data shows real decreases in transfers during August and September 2026, driven by lower federal tax collection, particularly from corporate income tax. The National Confederation of Municipalities (CNM) has warned that potential changes to income tax exemption thresholds could cause annual losses of up to R$ 9.5 billion for municipalities.