The Political Economy of Fiscal Reform in Brazil: The Rationale for the Suboptimal Equilibrum

This project examines fiscal reforms in Brazil since the 1990s, particularly in taxation, budgeting, and fiscal federalism. While recentralizing fiscal authority and massively expanding the extractive capacity of the state, policymakers chose not to revamp an inefficient tax system that has nonetheless proven capable of generating high levels of revenue. In budgeting, the economic crises of the mid-1990s prompted the government to rein in subnational fiscal imbalances but discouraged policymakers from introducing major changes in the tax system. As the executive derives utility from fiscal stability and inflation control because of electoral incentives and credibility gains in international markets, reform initiatives can generate political benefits for incumbent politicians. The paper finally argues that the Achilles heel of the sustainability of the Fiscal Responsibility Law is its enforcement technology: the -Tribunais de Contas-.

Bibliographic Details

Main Author:	Inter-American Development Bank
Other Authors:	Marcus André Melo
Format:	Working Papers biblioteca
Language:	English
Published:	Inter-American Development Bank
Subjects:	Fiscal Policy, H30 - Fiscal Policies and Behavior of Economic Agents: General, H31 - Household, H32 - Firm, H39 - Fiscal Policies and Behavior of Economic Agents: Other, H71 - State and Local Taxation Subsidies and Revenue, H77 - Intergovernmental Relations • Federalism • Secession, H83 - Public Administration • Public Sector Accounting and Audits, IDB-WP-117,
Online Access:	http://dx.doi.org/10.18235/0010929 https://publications.iadb.org/en/political-economy-fiscal-reform-brazil-rationale-suboptimal-equilibrum
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