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Asymmetries in the taxation of labor and capital income: impacts of changes in the structure of personal income taxation in Brazil

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  • Freire, Debora
  • Domingues, Edson
  • Britto, Gustavo

Abstract

This paper discusses the asymmetry between labor and capital (profits and distributed dividends) income taxation in Brazil and simulates changes in the personal income tax structure in a neutral approach. An original dynamic recursive computable general equilibrium model is applied. The results indicate that a more progressive taxation of personal income would lead to a drop in household income inequality in the Brazilian economy. Consumption, Investment and production oriented to domestic market would be encouraged. However, the impacts on inequality and on the economy are small given the small representativeness of the personal income tax in the Brazilian tax base. We conclude that for effective changes towards a more progressive tax structure in Brazil it is needed to study a higher taxation on capital income associated to a decrease of consumption taxes.

Suggested Citation

  • Freire, Debora & Domingues, Edson & Britto, Gustavo, 2019. "Asymmetries in the taxation of labor and capital income: impacts of changes in the structure of personal income taxation in Brazil," Conference papers 333110, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:333110
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    1. Erwin L. Corong & J. Mark Horridge, 2012. "PHILGEM: A SAM-based Computable General Equilibrium Model of the Philippines," Centre of Policy Studies/IMPACT Centre Working Papers g-227, Victoria University, Centre of Policy Studies/IMPACT Centre.
    2. Ferreira Filho, Joaquim Bento de Souza & Horridge, Mark Jonathan, 2006. "Economic Integration, Poverty and Regional Inequality in Brazil," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 60(4), February.
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