Perspectives on tax reform in Brazil

Organization(s): International Policy Centre for Inclusive Growth
Author: Marc Morgan
Regions: Latin America
Country: Brazil
Year: 2019
Language: English
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There is no question that the salience of tax reform in Brazil is high. It has become common to point out the country’s low quality of public services and high level of taxes, at least from the view of the country’s “middle class” and poorer income groups. In this context it would be desirable to introduce new ways of thinking about matters related to government policy generally, and tax policy more specifically. By understanding the function and potential of taxes, as well as their links to inequality and economic development, the seed can be planted for deep change. Once we conceptualise the potential of certain policies, momentum can be garnered to fully realise them if they are desirable to a majority of the population.

Of the many economic issues, taxation is the one that is most often clouded by emotional thinking based on opaque reference points of judgement. Everyone is inclined to generalise from their personal situation without much regard for society as a whole. But regard for the whole is crucial if we are to achieve some sense of equity. How would we like to imagine a tax system if we did not know our economic position in society? And how could this system better advance the material development of the whole?

This article attempts to examine the design of a tax system that would better serve the principles of equity and efficiency for Brazil and make the country a global leader in progressive tax policy. It is divided into four sections. First, the broad relationship between taxation and economic development will be explored, before delving into the link between taxation and inequality in Section 2. Section 3 presents the main proposals advanced in relation to two types of taxes, while Section 4 dwells on implications for other taxes currently debated in Brazil. Some final remarks conclude the article.

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