Discovering Tax Evasion in the Brazilian Residential Rental Market: An Analysis Based on the Brazilian Tax Authority Data, the Demographic Census, and the Household Budget Survey

This article presents a pioneering estimate of tax evasion on residential rental income in Brazil. The topic gains importance amid transformations in real estate markets and the global rise in families living in rented homes. Results are based on the cross-referencing of three databases: unprecedented access to Federal Revenue records (DIMOB), the Demographic Census, and the Family Budget Survey (POF). Tax evasion is measured through two indicators: tax evasion and contractual informality, both showing extremely high levels in terms of the number of rentals and the value of income. Strong regional heterogeneity is observed, with higher rates in capitals of the North, Northeast, and Central-West regions and in the country’s interior. In capitals alone, about 3.7 million rental properties are not reported to tax authorities. These findings raise important debates on income and property inequality, given the concentration of rental income among high-income groups and the significant share of rent payments made by low-income households. The potential for additional tax revenue is considerable: undeclared rental income is estimated between R$65 and R$215 billion annually. Informal rentals thus represent the prevailing pattern in Brazil, revealing a significant and often overlooked dimension of the informal economy.