Brazil’s lower house grants urgent status to bill aiming to reverse government’s IOF decree

Brazil’s Chamber of Deputies has approved urgent status for a legislative proposal that seeks to overturn a government decree adjusting the Tax on Financial Transactions (IOF). The urgency motion, approved by 346 votes to 97, accelerates the process for Bill 314/25, allowing it to bypass committee review and proceed directly to a full plenary vote.

The bill, presented by opposition leader Deputy Luciano Zucco (PL-RS), challenges Decree 12,499/25 issued by the Lula administration on June 11. The decree reduced the fixed IOF rate from 0.95% to 0.38%, reversing a previous increase implemented in May. 

However, it also broadened the scope of IOF collection by taxing new financial operations and private pension investments over R$300,000 (US$54,300), as well as invoice prepayment mechanisms known as “assigned risk” transactions.

Critics within the opposition argue that the decree introduces burdensome and unconstitutional tax changes without proper legislative backing. “This is the night when the people free themselves from yet another tax imposed by the Lula government,” Deputy Marcel van Hattem (Novo-RS) said during the session. 

“The urgency of the legislative decree bill that suspends an increase that, besides being abusive, is also illegal and unconstitutional, will be approved here, and I am convinced by a large margin.”

While the decree remains under legislative review, a separate measure imposing new taxes took immediate effect. Provisional Measure 1303/25, published on the same day as the IOF decree, establishes income tax on previously exempt financial instruments such as LCIs (Real Estate Credit Bills) and LCAs (Agricultural Credit Bills), applying a 5% tax on new acquisitions. It also sets a flat 17.5% tax on cryptocurrency investments.

Additionally, the provisional measure raises the tax on gross revenue earned by licensed sports betting operators from 12% to 18%.

Government allies defended the decree and provisional measures, arguing they target financial privilege and help preserve essential social programs. Deputy Jandira Feghali (PCdoB-RJ) emphasized that the taxes in question are aimed at high-income financial activities. “What we are discussing here is a decree that goes after those who have, after those who make money off money. This is not a problem for the vast majority of our people,” she said. 

“Just like the provisional measure targets bets and points to a set of exemptions that can no longer exist in Brazil, so that we don’t cut into social security benefits, BPC, because those are resources we cannot reduce or unlink from the minimum wage.”

Deputy Lindbergh Farias (PT-RJ), leader of the government’s coalition in the lower house, also voiced support for the tax policies and said efforts are underway to rally party support for the provisional measure already in force.