Distributional Impacts of Brazil’s Tax Reform: scenarios regarding Cesta Básica exemption
Coherent Identifier 20.500.12592/hq2x6x

Distributional Impacts of Brazil’s Tax Reform: scenarios regarding Cesta Básica exemption

31 October 2023

Summary

A consumption tax reform in Brazil has been recently approved by the House of Representatives, providing a full tax exemption for the yet undefined ‘National Basic Basket’ of goods (cesta basica nacional), alongside a cashback scheme that is yet to be determined. This note simulates the distributional impacts of different fiscally neutral scenarios of reduced rates and exemptions. The authors show that the exemption of taxes for food and personal care goods (such as those suggested by Law 10,925) would benefit the most vulnerable. Nonetheless, overall expenditures on certain items that are being considered for inclusion in the cesta are relatively concentrated on households in the top decile of the income distribution. Thus, a blanket exemption on Cesta Basica items may benefit the richest more in absolute terms. If the list of items in the exempted Cesta Basica is shortened and the equivalent resources of the potential forgone revenues are returned into a targeted cashback scheme, a far less regressive indirect tax system could be achieved.

Citation
“ Vale, Ricardo ; Lara Ibarra, Gabriel ; Fleury, Eduardo ; Trzcinski, Kajetan . 2023 . Distributional Impacts of Brazil’s Tax Reform: scenarios regarding Cesta Básica exemption . Poverty and Equity Notes; October 2023 . © World Bank, Washington, DC . http://hdl.handle.net/10986/40552 License: CC BY-NC 3.0 IGO . ”
Collection(s)
Miscellaneous Knowledge Notes Portuguese PDFs Available
Identifier externaldocumentum
34180896
Identifier internaldocumentum
34180896
Region country
Brazil
RelationisPartofseries
Poverty and Equity Notes; October 2023
Report
185270
UNIT
EFI-LCR-POV-Poverty and Equity (ELCPV)
URI
https://openknowledge.worldbank.org/handle/10986/40552
date disclosure
2023-10-16
region administrative
Latin America & Caribbean
theme
Inclusive Growth,Job Creation,Gender,Human Development and Gender,Data Development and Capacity Building,Economic Policy,Social Protection,Social Development and Protection,Economic Growth and Planning,Institutional strengthening and capacity building,Private Sector Development,Labor Market Policy and Programs,Public Sector Management,Jobs,Social protection delivery systems,Labor Market Institutions
DOI
http://dx.doi.org/10.1596/40552
Published in
United States of America
Rights
CC BY-NC 3.0 IGO
Rights Holder
World Bank

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Tags

governance :: national governance poverty reduction :: equity and development macroeconomics and economic growth :: taxation & subsidies law and development :: tax law vat reform national basic basket tax basic consumption tax exemption consumption tax reform taxation equity

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