Brazil's Lula to continue tax reform but replace income tax bill if elected, says aide

FILE PHOTO: Former Brazilian President Luiz Inacio Lula da Silva gestures during an interview with Reuters in Sao Paulo, Brazil December 17, 2021. Picture taken December 17, 2021. REUTERS/Amanda Perobelli/File Photo

BRASILIA (Reuters) - Brazil's former President Luiz Inacio Lula da Silva, if elected in October, will back a tax reform bill currently in the Senate that would unify federal taxes on consumption into one valued-added tax, a close aide told Reuters on Thursday.

He would also replace another bill changing income taxes that has already been approved by the lower house, said former minister Aloizio Mercadante, coordinator of Lula's Workers Party (PT) campaign program and a member of Lula's inner circle.

Lula has said on the campaign trail that the rich should pay more income tax and the poor less. He also advocates taxing dividends paid by companies.

The leftist leader is currently the frontrunner in the October presidential race, though his advantage over far-right incumbent Jair Bolsonaro has narrowed in recent polls.

The PT is studying taxation of dividends over 1 million reais ($194,600) per year, and the reduction in payroll taxes paid by companies.

The reform bill pending in the Senate aims to unify nine federal taxes into a one value-added tax (VAT) at the federal level, and merge state and municipal taxes into another VAT.

It also aligns between states the ICMS inter-state tax on the circulation of goods and services, establishing a 17% limit to rates levied, while substantially reducing or eliminating taxation on essential products.

"We have to take advantage of the progress already made in the Senate," Mercadante said.

($1 = 5.1387 reais)

(Reporting by Lisandra Paraguassu and Bernardo Caram; Writing by Marcela; Editing by Sandra Maler Ayres)

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