Congress imposes historic defeat on Lula and overturns IOF increase proposed by the government

In a vote held in record time, the Senate plenary confirmed the decision of the Chamber of Deputies to overturn President Lula's decree that increased the IOF. The vote was symbolic, without counting the votes, with the opposing votes of the PT bench and leader Weverton (PDT).

The analysis of the measure occurred after the approval of the PDL in the Chamber of Deputies by 383 votes in favor of suspending the measure and 98 votes against. The measure will be enacted.

The legislative decree project does not go to the president for approval — it is exclusive to Congress. If it is approved by both Houses, it is promulgated by the Board of the National Congress and published in the DOU. Upon publication, the government decree ceases to be valid immediately.

Motta announced the PDL vote in a post on social media on Tuesday night (24) as the first item on the agenda. Despite the project being negative for the government, Motta also mentioned others that are favorable to the Planalto, such as the provisional measure on payroll loans for CLT workers, among others.

The decree had been issued by the Executive under the argument of compensating losses with tax exemptions, but faced resistance for increasing the tax burden on the population at a time of economic fragility.

For critics, the increase in IOF would further penalize workers, small entrepreneurs and indebted families, by making credit operations such as personal loans, financing and the use of overdraft facilities more expensive.

During the vote in the Senate, the government leader, Jaques Wagner (PT-BA), described the situation as “traumatic” and criticized the failure of parliamentarians to comply with agreements. “This opens up a path that, in my opinion, is dangerous. Obviously, as the government leader, I am embarrassed,” he said.

In the Chamber of Deputies, parties that are part of the government and head ministries were decisive in the overthrow. Check out the votes of the main allies:

• União Brasil (2 ministries): 58 votes against the decree, none in favor;
• MDB (3 ministries): 41 against, 2 in favor;
• PDT (1 ministry): 16 against, none in favor;
• PP (1 ministry): 48 against, none in favor;
• PSD (3 ministries): 27 against, 1 in favor;
• PSB (2 ministries): 9 against, 3 in favor;
• Republicans (1 ministry): 42 against, none in favor.

Only the PSOL voted entirely with the government (13 votes). The PT registered 65 votes in favor of the decree and only one against — which was an error by deputy Rui Falcão (SP), already corrected.

Climate of tension and surprise

The quick vote was marked by tension between Congress and the Planalto Palace. The night before, the Speaker of the House, Hugo Motta (Republicans-PB), announced that he would put the bill on the agenda, taking both the government and party leaders by surprise. In addition, Motta appointed a PL deputy to report on the proposal — a clear sign of distancing himself from the Planalto Palace.

In an interview with CNN Brasil, Motta claimed that he decided to put the text on the agenda because he perceived the “will of the House”. Behind the scenes, however, it is pointed out that the gesture was driven by irritation with the government, especially regarding the release of amendments and the narrative that Congress would be responsible for a possible increase in the electricity bill.

The Planalto's reaction came with statements from the Finance Minister, Fernando Haddad, who defended the decree: “It corrects an injustice: it combats tax evasion by the richest to balance public accounts and guarantee the social rights of workers.”

Behind the scenes, government members are considering appealing to the Federal Supreme Court (STF) to reverse the decision, but a more pragmatic wing advocates a political solution to avoid further wear and tear.

Historical precedent

The last time a presidential decree was overturned by Congress was in 1992, when the Legislature suspended a measure by then-president Fernando Collor de Mello regarding the payment of court orders.

Now, in 2025, the episode exposes the fragility of the government's political articulation and reveals a Congress willing to take the lead in the country's fiscal decisions.

The overturning of the measure by Congress reinforces the friction between the Legislature and the federal government on economic issues. In addition, it signals a rejection of any attempt to increase taxes without dialogue with Parliament.

With this decision, the decree loses its effect as soon as it is enacted and published in the Official Gazette. Therefore, the IOF returns to its previous rates, as provided for in the legislation prior to the Executive's intervention.