Photo provided by freepik.com
1 – Tax burden and distribution
The weight of the tax burden in Brazil has continued to grow since the return to democracy in 1985, and is now around 34% of GDP. According to data published by the Federal Revenue of Brazil (“Tax Burden in 2016”), around 48% of the total tax burden comes from indirect taxes, which affect consumption, 20% correspond to direct taxes on income and earnings. capital (capital gains) and 26% on salaries. In Brazil, there is no indirect tax identical to VAT, but there are several different taxes that apply depending on the territorial community in question (Union, State or Municipality) and the products in question.
2 – The main taxes and contributions
The Federal Constitution of Brazil of 1988 divided tax jurisdiction between the three entities of the federation, as follows:
– THE UNION is competent to set income tax; imports and exports; industrialization; financial products; rural property and great fortunes.
– The STATES are competent to set inheritance tax and taxes on donations; car ownership; and, above all, the Tax on the Circulation of Goods and Services – ICMS;
– The MUNICIPALITIES set and collect IPTU and those related to the transfer of real estate (ITBI) and service tax – ISS, to be paid by service providing companies with headquarters or establishment in the municipality.
3 – A tax system more favorable to capital and high income
With a 48% tax on consumption in 2017, Brazil continues to favor indirect taxation to the detriment of direct taxation, even after 15 years of the Workers' Party-PT government, with the presidencies of Lula and then Dilma that did not increase the importance of direct taxation.
The Brazilian tax system is so unfavorable to the less wealthy that the tax on large fortunes, provided for in the Constitution, was never instituted and the dividends distributed are not subject to any tax.
Likewise, the inheritance tax, which is the responsibility of the States, varies between States, but remains low, on average, at 4% to 5%. However, there is a national debate that increasingly contests low taxation.
As for personal income tax, it is subject to low progressiveness, as shown in the table below for 2018:
Photo by freepik.com
