Indirect Tax Incidence in Brazil : Assessing the Distributional Effects of Potential Tax Reforms
Using recent expenditure survey data, this paper investigates the incidence of all indirect taxes in Brazil. It applies a novel approach to estimate the effective tax rate by computing the specific cumulative taxes levied on thousands of items avai...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/undefined/606861640025992934/Indirect-Tax-Incidence-in-Brazil-Assessing-the-Distributional-Effects-of-Potential-Tax-Reforms http://hdl.handle.net/10986/36783 |
| Summary: | Using recent expenditure survey data,
this paper investigates the incidence of all indirect taxes
in Brazil. It applies a novel approach to estimate the
effective tax rate by computing the specific cumulative
taxes levied on thousands of items available in the data
set. The findings show that for every R$100 of indirect tax
revenue, the first and second deciles pay R$2 and R$3,
respectively, while the ninth and tenth deciles pay R$16 and
R$33, respectively. Meanwhile, indirect taxes represent
between 23 and 45 percent of income among the poorest
households. Simulations of a value-added tax reform suggest
that it could be inequality reducing both horizontally and
vertically. A flat value-added tax accompanied by excise
taxes on fuel items, alcohol, and tobacco would also lead to
lower decreases in expenditures. Households would spend 2.8
percent less on average, with those in the bottom (top)
decile spending 7.0 percent (1.5 percent) less. |
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