VAT in Brazil could go to 28% and be the highest in the world, according to a survey by Ipea

Approved in the Chamber of Deputies, favored tax regimes, reduced rates, and exemptions have increased the new tax


Based on the proposed Tax Reform approved by the Chamber of Deputies, the effective rate of the new Brazilian tax over the consumption of goods and services would be 28.4%, points out a technical note from Ipea (Institute of Applied Economic Research).

It would be the highest in the world for a VAT (Value Added Tax). Today, the highest of its kind is that of Hungary, at 27%.

The Brazilian rate will be defined in a supplementary law. The initial expectation was that it would stay at 25%, but the effects of favored regimes, reduced rates, and exemptions included in the text before the voting by the House should push for a higher rate.

Footwear production line; a reform currently under consideration in Congress seeks to modernize taxation on the consumption of products and services - Adriano Vizoni/Folhapress

The Ipea study is the first to measure the possible effects of the reform, based on cross-referencing the Brazilian Federal Revenue Office's data for sectoral collection and the exceptions negotiated by deputies, keeping in mind the maintenance of the tax burden.

The details of the simulation can be found in the Conjuncture Letter entitled "Tax Reform Proposals and their Impacts: A comparative assessment", by researcher João Maria Oliveira.

Translated by Cassy Dias

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