Impact and Implications of Recent and Potential Changes to Brazil's Subnational Fiscal Framework

Brazil's subnational fiscal framework has remained a source of unabated controversy despite its relative stability over the past decade. The objective of this study is to evaluate the nature and impact of recent and expected changes to Brazil's subnational fiscal framework in light of these debates. More specifically, this work has focused on recent and proposed changes to: 1) the Tax on Goods Circulation, Communication and Inter-municipal and Inter-state Transportation Services (ICMS); 2) the State Participation Fund (FPE) as well as the transfers from oil and mining royalties; and 3) the subnational debt and borrowing framework. These three broad areas are precisely the ones that are the center of the current debate on Brazil's subnational fiscal framework. In order to achieve the proposed objective, three background papers were commissioned, each covering one of the issues outlined above. The main value-added of this study is an examination-and an attempt at a quantification of the impacts of the changes underway in these three dimensions of Brazil's intergovernmental fiscal framework. The remainder of this synthesis report is organized as follows. Section two provides a brief overview of how Brazil's subnational fiscal framework currently works. Section three describes the ongoing efforts to reform Brazil's subnational fiscal framework and points to the advantages of a more coordinated approach over a piecemeal one. Section four discusses the expected fiscal impact on subnational governments of the most likely reform scenarios. Section five concludes. Finally, the amended proposal also kept the original provisions regarding the validation of past tax incentives unchanged. It included a mandate for past tax incentives to be approved by state legislative and to be disclosed at the official Gazette. The main change was the creation of a provision to safeguard the existing tax incentives until their expiration or 2033, whichever comes first.

Bibliographic Details

Main Author:	World Bank
Language:	English en_US
Published:	Washington, DC 2013-09-27
Subjects:	ACCOUNTING, ADMINISTRATIVE COSTS, ALLOCATION OF RESOURCES, AMOUNT OF CREDITS, AMOUNT OF DEBT, ARREARS, BANK POLICY, BANKING SECTOR, BASIC EDUCATION, BENEFICIARIES, BENEFICIARY, BLUE CHIP, BLUE CHIPS, BONDS, BORROWING, BORROWING RULES, BUDGET CONSTRAINTS, CAPACITY BUILDING, CASH OUTFLOW, CENTRAL GOVERNMENT, COEFFICIENTS, COLLECTION PROCESS, COMMODITY PRICES, COMPENSATION FUND, COMPLIANCE COST, CONSUMER PRICE INDEX, CREDITORS, CUSTODY, DEBT CONTRACTS, DEBT CRISIS, DEBT FINANCE, DEBT INTEREST, DEBT ISSUANCE, DEBT OUTSTANDING, DEBT RESTRUCTURING, DEBT SERVICE, DEBT STOCK, DEBTORS, DEBTS, DECENTRALIZATION, DECENTRALIZATION PROCESS, DEVELOPMENT BANK, DEVOLUTION, DIFFERENTIALS, DISTRICT, DOMESTIC BANKS, DOMESTIC CAPITAL, DOMESTIC CAPITAL MARKETS, ECONOMIC COOPERATION, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ELECTRICITY, EQUALITY, EQUALIZATION, EXCHANGE RATE, EXPENDITURE, EXPENDITURE NEEDS, EXPENDITURES, EXTERNAL DEBT, FEDERAL BUDGETARY RESOURCES, FEDERAL CONSTITUTION, FEDERAL DEBT, FEDERAL DISTRICT, FEDERAL LAW, FEDERAL REVENUES, FEDERAL SENATE, FEDERAL TAX, FEDERAL TAXES, FEDERAL TRANSFERS, FEDERAL TRANSFERS TO STATES, FINANCES, FINANCIAL CRISIS, FINANCIAL INSTITUTION, FISCAL ADJUSTMENT, FISCAL AUTONOMY, FISCAL BALANCE, FISCAL CAPACITY, FISCAL DISCIPLINE, FISCAL FEDERALISM, FISCAL FRAMEWORK, FISCAL IMPACT, FISCAL PLANS, FISCAL POLICY, FISCAL REFORMS, FISCAL RESPONSIBILITY, FISCAL SPACE, FISCAL SUSTAINABILITY, GOVERNMENT ACCOUNTS, GOVERNMENT REVENUE, GROSS DOMESTIC PRODUCT, GROSS REVENUES, GROSS SALES, HARD BUDGET CONSTRAINTS, HOLDING, HOUSEHOLD INCOME, HUMAN DEVELOPMENT, INCOME TAX, INDEBTEDNESS, INEQUALITIES, INFLATION, INFRASTRUCTURE FINANCING, INFRASTRUCTURE INVESTMENTS, INITIAL DEBT, INTEREST RATE, INTEREST RATE ADJUSTMENT, INTEREST RATES, INTEREST SUBSIDY, INTERGOVERNMENTAL FINANCE, INTERGOVERNMENTAL FISCAL TRANSFERS, INTERGOVERNMENTAL TRANSFER, INTERGOVERNMENTAL TRANSFERS, INTERNATIONAL BANK, INVESTMENT FINANCING, INVESTMENT RATE, ISSUANCE, ISSUANCE OF BONDS, LACK OF TRANSPARENCY, LAWS, LEGISLATION, LEGISLATIVE FRAMEWORK, LEVEL OF GOVERNMENT, LICENSES, LONG-TERM INTEREST, LONG-TERM INTEREST RATE, LOW INTEREST RATES, MACROECONOMIC STABILIZATION, MATURITY, MEDIUM ENTERPRISE, MEDIUM ENTERPRISES, MEDIUM-TERM FISCAL, MINISTRY OF FINANCE, MORAL HAZARD, MULTILATERAL LENDERS, MUNICIPALITIES, MUNICIPALITY, NATIONAL TREASURY, NET CURRENT REVENUES, NET DEBT, NET REVENUES, NEW ENTRANTS, OIL PRICE, OUTSTANDING AMOUNT, OUTSTANDING LOANS, PENSIONS, POLITICAL ACCOUNTABILITY, PRIVATE BORROWERS, PRIVATE SECTOR, PRODUCTIVITY, PROPERTY TAX, PROVISIONS, PUBLIC, PUBLIC BANKS, PUBLIC EXPENDITURE, PUBLIC EXPENDITURE MANAGEMENT, PUBLIC INVESTMENTS, PUBLIC SECTOR, PUBLIC SERVICE, PUBLIC SERVICE PROVISION, PUBLIC SERVICES, PUBLIC SPENDING, RATES OF RETURN, REAL INTEREST, REAL INTEREST RATES, REDISTRIBUTION, REFORM PROGRAMS, RENEGOTIATION, RENEGOTIATIONS, RETURN, RETURNS, REVENUE COLLECTION, REVENUE COLLECTIONS, REVENUE EQUALIZATION, REVENUE INCREASE, REVENUE LOSS, REVENUE SHARING, REVENUE SHARING SCHEME, REVENUE SOURCE, REVENUE SOURCES, SETTLEMENT, SOCIAL SECURITY, SOLVENCY, SOURCES OF FUNDS, STATE GOVERNMENTS, STATE OWNED BANKS, SUBNATIONAL, SUBNATIONAL DEBT, SUBNATIONAL FINANCE, SUBNATIONAL FINANCES, SUBNATIONAL FISCAL ISSUES, SUBNATIONAL GOVERNMENT, SUBNATIONAL GOVERNMENTS, SUBNATIONAL LENDING, SUBSIDIARY, TAX, TAX ADMINISTRATION, TAX BASE, TAX BURDEN, TAX COLLECTION, TAX COLLECTIONS, TAX COMPLIANCE, TAX COSTS, TAX CREDIT, TAX CREDITS, TAX EXEMPTION, TAX INCENTIVE, TAX INCENTIVES, TAX PAYMENTS, TAX POLICIES, TAX RATE, TAX RATES, TAX REFORMS, TAX REGIME, TAX REGIMES, TAX REVENUE, TAX REVENUE SHARING, TAX REVENUES, TAX SYSTEM, TAX TREATMENT, TAXATION, TOTAL DEBT, TRANSACTION, TRANSPORT, TRANSPORTATION SERVICES, VALUATION, WAREHOUSE, WAREHOUSES,
Online Access:	http://documents.worldbank.org/curated/en/2013/09/18423427/impact-implications-recent-potential-changes-brazils-subnational-fiscal-framework https://hdl.handle.net/10986/20773
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