The reform was among the leftist leader’s key political pledges as he prepares for next year’s presidential race.

It sets the monthly income tax exemption threshold at R$5,000, more than three times the minimum wage, from the current R$3,036.

It also lowers the tax burden for workers earning up to R$7,350 a month.

The president said in a TV address that the reform “attacks the main cause of inequality” in Brazil and “will be an extraordinary stimulus” for trade, industry and services”.

A tax on individuals with annual income above R$600,000 was passed to offset revenue losses.

“This income tax relief means more money in people’s pockets, which means greater purchasing power and increased consumption,” Lula said.

“It is a decisive step toward transforming this reality (of inequality), but it is only the first. You can be sure we will not stop there,” he added.