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Tax Systems Under Fiscal Adjustment: A Dynamic CGE Analysis of the Brazilian Tax Reform

  • Victor Duarte Lledo
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    This paper uses a dynamic computable general equilibrium model (CGE) to analyze the macroeconomic and redistributive effects of replacing turnover and financial transaction taxes in Brazil by a consumption tax. In order to approximate Brazil''s compliance with its fiscal adjustment targets, the proposed reform is subject to a non increasing path for the level of public debt. Despite an increase in the average consumption tax rate in the first years after the reform, a majority of individuals experienced an increase in their lifetime welfare. This result rejects the hypothesis that the on-going fiscal adjustment effort carried on by the Brazilian government was an obstacle to the implementation of a more efficient tax system.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/142.

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    Length: 33
    Date of creation: 01 Jul 2005
    Date of revision:
    Handle: RePEc:imf:imfwpa:05/142
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