Provisional Measure 1.303 has been a central topic in recent tax discussions in Brazil, especially due to its potential to raise up to R$20 billion in revenue by 2026. In this article, we will explore the repeal of this measure and its implications for tax collection, as well as analyze the revenue offset in response to the rejection of the IOF increase.

The situation becomes even more complex when we consider the fiscal challenges for 2026, aiming for a zero deficit, and the electoral implications that the rejection of the MP brings to the government in a crucial year.

Context and overturn of MP 1.303

A 1.303 Provisional Measure emerged as an attempt by the government to raise taxes on investments and betting houses.

This was intended to offset the loss of revenue following the rejection of the increase in the Tax on Financial Transactions (IOF).

The expectation was to raise around R$20 billion by 2026. However, the National Congress overturned the proposal, creating a challenging scenario for the tax planning from the government.

The effects of this decision are immediate and significant.

In an election year, the overthrow represents a blow that demands urgent adjustments to the government's economic strategy.

Furthermore, it eliminates the expected target for increasing revenue, exacerbating the projected deficit.

Among the immediate impacts, we can highlight:

• Drop in revenue of R$46 billion already foreseen in the 2025 and 2026 budgets
• Political pressure to find new sources of revenue
• Implications for investor confidence

To learn more about the impact and reactions to the measure, you can access the full article BBC.

Faced with this complex scenario, the government is now focusing on alternatives that rebalance its accounts, facing a constantly changing economic and political landscape.

Projected revenue: before and after

The rejection of Provisional Measure 1.303 had significant effects on the federal government's revenue projections.

Initially, the government expected to raise $ 20 billion in 2026 with the increase in taxes on investments and betting houses.

However, after the rejection, these projections were drastically reduced.

One of the objectives of the MP was to compensate for the loss of revenue after the rejection of the increase in the IOF.

The main source of revenue would be the increase in taxes on interest on equity, LCIs, LCAs and betting houses.

Below, a comparative table shows the difference between the revenues forecast with the MP and the current estimates:

Scenario	2026
With MP	$ 20 billion
No MP	$ 17 billion

The rejection of the MP generates an impact of, at least, $ 3 billion in public accounts, increasing the challenge of achieving a zero deficit in an election year.

According to the portal G1 – Economy, the most affected areas are investments and fundraising by fintechs.

With expected revenue declining, the government faces a significant challenge in balancing the budget, especially in social policies and infrastructure.

Fiscal challenges towards zero deficit

The goal of zero deficit The 2026 budget is ambitious and crucial for Brazil's fiscal health, but it faces significant challenges following the rejection of Provisional Measure 1.303. This measure sought to increase taxes on investments and gambling houses, promising to add up to R$20 billion to revenue.

However, with its rejection, the government loses potential essential revenue, further complicating the balance of public accounts in a scenario of fiscal and political pressure.

It is important to highlight that the fiscal deficit compromises the government's ability to invest in strategic areas and may increase public debt, which harms the country's credibility with international investors.

However, alternatives exist and should be explored thoroughly.

Among them, the most important are the cutting of expenses, which needs to be carried out with attention so as not to affect essential services to the population and, more significantly, economic growth.

Another potential solution would be subsidy review, directing incentives only to sectors that really need them.

The government may also consider implementing new forms of revenue collection that do not disproportionately affect the less privileged classes.

With the electoral horizon approaching, it becomes vital to maintain a balanced approach between fiscal rigor and political sensitivity, ensuring compliance with the goal of zero deficit.

Political-electoral repercussions in 2026

The rejection of Provisional Measure 1.303 significantly increased the fiscal pressures for 2026, especially in an election year.

Without the expected revenue of up to R$20 billion, the government faces the challenge of reaching the zero deficit target.

Investors are now questioning the government's ability to accurately estimate its future revenues..

Alternatively, the government may consider increasing the IOF, according to information from Gazeta do Povo website.

The situation poses obstacles to the fulfillment of campaign promises and puts at risk the implementation of public policies valued by voters.

Additionally, cutting tax benefits and spending becomes a viable but politically delicate option, as discussed by Minister Haddad in Jota.info.

Political consequences include:

• Less fiscal space for social programs
• Readjustment of voters' expectations regarding campaign promises
• Rising tensions between the government and Congress

This highlights the complexity of managing a budget amid competing political interests.

In short, the repeal of Provisional Measure 1.303 represents a significant challenge for the Brazilian government's fiscal management, especially in an election year, where the quest for a zero deficit becomes even more pressing.