Flaviopédia Português
Cheaper Brazil

Less tax on what you consume

the price on the shelf is also made of tax

Proposes reviewing and resizing the ongoing tax reform, reducing the VAT (IVA), ensuring non-cumulative taxation and reducing exceptions, with the aim of lowering the burden on production and consumption.

In the program: [p. 30] · Translated by Flaviopédia from the official Portuguese text; the Portuguese quote is authoritative. Read the original in Portuguese

What the program says

A large part of what Brazilians pay at the supermarket is not food: it is tax. And those who feel it first are those who have the least, because they spend almost everything they earn precisely on what is taxed the most. The comparison with other countries is dramatic: with the current tax reform, Brazil is on track to have one of the highest value-added taxes, or VAT (IVA), in the world, projected at around 30%, against an average of 19% in OECD countries, and even less in several neighboring countries. That is because the tax reform approved by the current administration was left to the whims of the lobbies. The entire transition was left for the following terms of office, which spared those who approved it political wear and tear, allowed the strongest to win and left the population with a cost approaching R$ 1 trillion, with no defined budget source for the two funds created by the reform, plus more than R$ 500 billion in lobby-driven exceptions that became permanent. We will carry out the review and resizing of the tax reform under way and of the tax increase carried out by the current government, with the aim of effectively reducing the burden on production and consumption. We will correct its distortions, reduce the VAT, currently projected at one of the highest levels in the world, and ensure non-cumulative taxation, so that tax is not charged on tax. That way the reform becomes more balanced, preserving simplification and adherence to the best international practices. The simplification effort will continue: fewer taxes, unified legislation, tax relief for exports and investment, and a reduction in exceptions, so that similar groups pay similar taxes. The virtuous circle is clear: lower taxes, more formality, more growth. The result Brazilians need to see is not a rate on paper: it is a lower price on the shelf, at the fuel pump and on the bill that arrives every month. [p. 30]

In plain language

  • The text states that a large part of what people pay at the supermarket is tax. It says those who have the least feel it first, because they spend almost everything they earn on what is taxed the most.
  • It states that, with the current tax reform, Brazil is on track for a VAT projected at around 30%, against an average of 19% in OECD countries. It also says the reform’s transition was left for the following terms of office, with a cost approaching R$ 1 trillion and no defined budget source for the two funds created, plus more than R$ 500 billion in exceptions that became permanent.
  • It proposes reviewing and resizing the tax reform under way and the tax increase carried out by the current government, with the aim of reducing the burden on production and consumption.
  • It provides for correcting distortions in the reform, reducing the VAT and ensuring non-cumulative taxation, so that tax is not charged on tax.
  • It states that simplification continues, with fewer taxes, unified legislation, tax relief for exports and investment and a reduction in exceptions, so that similar groups pay similar taxes. According to the text, the expected result is a lower price on the shelf, at the fuel pump and on the monthly bill.

What is not in the program

  • It does not state the intended VAT rate nor how much the burden on production and consumption would be reduced.
  • It does not specify which distortions would be corrected, which exceptions would be reduced or which of the current government’s tax increases would be reviewed.
  • It does not name the legal instrument for reviewing the reform nor the path through Congress.
  • It gives no timeline for the review.
  • It gives no cost estimate and names no funding source for the tax reduction.