Brazil’s Congress Rejects MP 1303/2025, Jeopardizing Funding for Social Programs
Brazilian Congress's rejection of MP 1303/2025 halts a key tax reform intended to fund social programs, drawing sharp reactions from President Lula and political leaders.
- • MP 1303/2025 aimed to unify financial investment taxation at 18% starting January 2026.
- • The MP was expected to raise approximately R$ 17 to R$ 20.8 billion in government revenue.
- • The Chamber of Deputies voted 251 to 193 to remove the MP from the agenda, causing its expiration.
- • President Lula and rapporteur Carlos Zarattini criticized the rejection as harmful to social programs and fiscal balance.
Key details
On October 8, 2025, Brazil’s Chamber of Deputies decided to withdraw the Provisional Measure 1303/2025 (MP 1303/25) from the agenda, causing its expiration and sparking strong political fallout. The measure sought to implement a uniform 18% tax on financial investments starting January 2026 and to increase the Contribuição Social sobre o Lucro Líquido (CSLL) on certain financial institutions. Its passage was expected to raise significant government revenue—initially estimated at R$ 20.8 billion—and play a crucial role in achieving fiscal balance for 2026. However, the MP lost validity as it required approval by October 8 and subsequent Senate confirmation.
President Luiz Inácio Lula da Silva condemned the decision, labeling the defeat a setback for the Brazilian people and social programs reliant on the proposed funds. Lula criticized opposition forces, saying they undermined efforts to tax the wealthiest and support public policies benefiting millions. The vote to remove the MP from the agenda passed with 251 votes in favor and 193 against, reflecting deep parliamentary division. Finance Minister Fernando Haddad had advocated for its approval, urging the Chamber to respect government agreements.
Carlos Zarattini, the rapporteur for the MP, lamented the archiving of the measure, which was projected to generate roughly R$ 17 billion in revenue in 2026 after revisions. He attributed the rejection to political interference by São Paulo Governor Tarcísio de Freitas, who Zarattini accused of coordinating opposition among right-wing parties. Zarattini stressed the government now faces a difficult task to recover lost funds and implement fiscal adjustments without the MP.
Opposition leaders, including PL party leader Sóstenes Cavalcante, applauded the rejection, framing it as a democratic victory against tax increases and government overreach. Meanwhile, Minister Gleisi Hoffmann criticized wealthy minority groups opposing reforms that would bolster state social programs.
With MP 1303/2025 no longer valid, the government must explore alternative measures to address fiscal challenges and adequately finance social initiatives planned for 2026. The episode highlights ongoing political tensions regarding tax reform and the funding of Brazil’s social programs.