Tax reform: Even with the “lock-in,” Brazil will still be among the countries with the highest consumption tax burden | Economy

According to the text presented by the Senator, the maximum tax burden will be the average from 2012 to 2021, in proportion to GDP, represented by the revenues of PIS/PASEP, COFINS, IPI, ISS and ICMS.

The Extraordinary General Secretariat for Tax Reform of the Ministry of Finance reported The average of these ten years (2012 to 2021) of the burden related to these taxes is 12.5% ​​of GDP..

This level Exceeds the Organization for Economic Co-operation and Development (OECD)which brings together more developed countries and other countries.

Senator Eduardo Braga said that this bloc is important to give peace of mind to taxpayers and the Brazilian productive sector, and to ensure the “neutrality” of the Brazilian tax burden.

He adds that setting a ceiling on the tax burden “will help citizens mobilize against the increase in the burden of these taxes, demanding that governments adhere to austerity and control spending.”

International comparison

To make an international comparison, the Federal Revenue Service used data from 2020, when revenues from consumption in the country represented 13.5% of GDP.

Last year, according to the Ministry of Finance, the five taxes participating in the tax reform (PIS, Cofins, IPI, ICMS and ISS) Collecting the equivalent of 13% of GDP.

Even at 12.5% ​​of GDP, within the limit set by Rapporteur Eduardo Braga’s proposal, the Brazilian tax burden on consumption (including PIS, Cofins, IPI, ICMS and ISS) would be higher than the OECD average and development, which consists of the most developed countries. (10.8% of GDP).

And also from countries such as the United Kingdom (10.1% of GDP), Canada (8.8% of GDP) and Chile (10.6% of GDP) – see below.

If Brazil imposes consumption taxes at the OECD average level, i.e. 10.8% of GDP, on 200 billion Brazilian reals Lower taxes would have been imposed on products and services in 2020 in the country.

A consequence of the greater concentration of the Brazilian tax burden on consumption in Brazil is a high degree of “regressiveness” (whereby proportionately more is collected from those who earn less).

The logic here is that if the tax is the same for everyone, it takes up a larger share of the income of those who earn less.

“Numerous studies show that Brazilian taxes are highly regressive, because they burden the poor much more than the rich, in proportion to each person’s income, in other words, they are a factor that deepens social inequality,” assessed the Fiscal Justice Institute, an association think tank. Civil non-profit.

Senator Eduardo Braga, rapporteur on tax reform in the Senate, also draws attention to this point.

“We are firmly convinced that taxpayers, as consumers, cannot continue to support the burden of the state. Taxes on consumption are regressive and burden the poor even more,” Senator Eduardo Braga said in the report.

While consumption taxes are high in Brazil, as are salaries, other tax bases, such as income and assets, have values ​​lower than the world average.

in At 6.9% of GDP in 2020, Brazil’s income tax burden was well below the OECD average. (10.6% of GDP) and more developed countries, such as Canada (16.7% of GDP) and France (11.9% of GDP).

Hey The federal government said it intends to make changes to income tax only after approving the country’s consumption tax reform National Senate.

Increasing income taxes is one of the recommendations of analysts to tax the rich and reduce social inequality. Among the possible paths are:

• Resuming the collection of income tax on the distribution of profits and dividends from companies to individuals. Corporate profits are already taxed in Brazil, but since 1996, their distribution to individuals has been tax-free – which is not the case in most countries. This is considered a jabuticaba for the Brazilian economy, as the vast majority of countries impose taxes on the distribution of profits and dividends.
• Create a range, and a higher rate, for IRPF collection. Currently, the highest percentage in Brazil reaches 27.5%, while it exceeds this level in developed countries. In the United States of America, rates range from 10% to 37%. In Portugal the scale ranges from 14.5% to 48%, and in Argentina from 5% to 35%.
• Reducing health and education deductions in personal income tax. Educational deductions are for the benefit of the rich and the proposal is to reconsider the benefit. Indeed, 88% of the IR subsidy for health, according to the previous Ministry of Economy assessment, in 2022, is concentrated in the part (20%) corresponding to households with the highest income, and 16.4% (1%) with the highest income.

Wealth taxes

According to federal revenue data on the tax burden for 2021, only 4.87% of all taxes collected in Brazil that year were on real estate.

In 2020, wealth taxes represented 1.6% of GDP, below the OECD average. It is made up by the most developed countries, 1.8%.

It was also lower than countries such as Canada (4.2% of GDP), France (4% of GDP), the United Kingdom (3.9% of GDP) and the United States (3% of GDP).

At a symposium organized by the Institute for Applied Economic Research (Ipea) last week, Alberto Barrex, advisor at the Inter-American Development Bank (IDB), assessed that the increase in debt and inequality in Latin America could lead countries in the region to review their wealth tax models, which, according to That being said, revenues are low.

Among the taxes on assets in Brazil, or property, is the IPVA (state) tax imposed on cars; IPTU (municipality) on property value; ITCMD (state), also known as inheritance tax; ITBI (Municipality) on transfer of property; ITR (State), on rural property.

“Heritage taxes are important and must be taken into account. In Latin America, property taxes are very poorly levied, especially property taxes. There we have a deficit that we need to correct,” Alberto Parres, a consultant at the Inter-American Development Bank (IDB), said in the middle of this year. “We need to think about smart designs.”

The text also includes charging fees ITCMD (Cause of Mortuary Transfer and Donation Tax) is phased in gradually depending on the value of the inheritance or donation. The fee will be paid at the deceased person’s home.

Unafesco Nacional’s technical note, issued in March this year, recommends imposing a so-called high wealth tax to impose more taxes on the rich.

“Historically, a wealth tax has already been adopted in many countries, maintained in some (such as Uruguay, Switzerland, Norway and France) and amortized and then resumed in others (such as Spain, which reintroduced the tax in 2011),” he says. . the document.