Tax Reform in Brazil: understand and see what can change

Considered a priority by the economic team of the Lula government, the tax reform on consumption may result in some changes. One of the main objectives of this reform is to unlock investments and boost the economy.

The proposal, which has been discussed for a long time, if approved, will change the way taxes on products and services will be charged. Initially, tax changes will be discussed in taxes such as ICMS (state), PIS/Cofins and IPI (federal) and municipal ISS, which would be replaced by IVA (Value Added Tax).

With the implementation of this new tax, the taxes would become non-cumulative and the consumption tax (VAT) would be charged at the destination and not at the place where the consumed products are produced. There are controversial points regarding the tax reform: the penalization of the poorest (since the cost of consumption is higher for the most vulnerable population) and the increase in taxation on services, which would result in an increase in the price of health services, schools and private universities and others.

Although this measure is considered fundamental to unlock the economy and boost the country’s growth, from a political point of view it is considered complex, as different governments have tried to carry it out and have not been successful. However, the Lula government’s economic team is preparing to defend the reform proposal.