Brazil considers value added tax
Brazilian state and federal finance officials met recently with experts from the Forum of Federations to discuss the workings of fiscal federalism in Brazil, focusing on the possible adoption of a new dual Value Added Tax (VAT) for Brazil.
In the discussions, which brought together more than 100 senior Brazilian officials, the Vice Minister of Finance, Bernard Appy, explained that the new tax would be collected at the final destination, when the finished good is sold or the service rendered, rather than during intermediate steps. This, he said, would correct the serious economic distortions associated with Brazil's current tax and generate additional revenues for the government resulting from reduced leakages in the system. A key issue in winning agreement to the reform will be resolving the implications for revenue sharing with the states and related issues of enhanced regional development policies. Forum President George Anderson and Australian federalism expert Roger Wilkins were invited to participate in the meeting because of extensive work the Forum has done with the Fiscal Forum of the Brazilian States - FFBS.
They agreed that the proposed tax measure was a significant improvement in policy terms though they recognized the challenges in achieving agreement. They thought the current post-electoral context in Brazil might offer a valuable, but limited window, for pushing for a new regime.
The event was organized by the Secretary of Revenue of the State of Rio Grande do Norte in the context of a meeting of National Council of Treasury Policies (Conselho Nacional de Política Fazendária). Officials from the State Fiscal Forum also presented proposals on the VAT and Equalization. The presentations are available in Portuguese and English.
Other Forum of Federations activities in its March 26 to March 30, 2007, mission to Brazil included: