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Tax Reform, Income Distribution and Poverty in Brazil: an Applied General Equilibrium Analysis

Author

Listed:
  • Joaquim Bento de Souza Ferreira Filho
  • Carliton Vieira dos Santos
  • Sandra Maria do Prado Lima

Abstract

This paper analyses the impacts of three different indirect tax policies on the Brazilian economy: reduction of indirect taxes over the main household consumption products: reduction of indirect taxes over the main inputs used in agriculture; and the reduction of indirect taxes over all products in a specific region (Sao Paulo State) in Brazil. The analysis was carried out with the aid of an inter-regional static general equilibrium model of the country that was linked to a micro-simulation model used for poverty and income distribution analysis. The first two simulations showed that the policies have potential to improve income distribution, mainly benefiting the lower income families in the poorest regions. The reduction of indirect taxes over goods and services in Sao Paulo state shows that this state would benefit more compared to the other states, an example of the so called "fiscal war". This policy also points to some regressive effects of the tax policies on income distribution, since it disproportionately benefits the higher income groups located in the Sao Paulo state. The strong fall significant drop in tax collection should be taken as a sign for restraining policy implementation.

Suggested Citation

  • Joaquim Bento de Souza Ferreira Filho & Carliton Vieira dos Santos & Sandra Maria do Prado Lima, 2007. "Tax Reform, Income Distribution and Poverty in Brazil: an Applied General Equilibrium Analysis," Working Papers MPIA 2007-26, PEP-MPIA.
    • Handle: RePEc:lvl:mpiacr:2007-26
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    References listed on IDEAS

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    1. Domingues, Edson P. & Haddad, Eduardo A., 2003. "Política Tributária e Re-localização," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 57(4), October.
    2. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
    3. Hertel, Thomas W. & Mark Horridge, J. & Pearson, K. R., 1992. "Mending the family tree a reconciliation of the linearization and levels schools of AGE modelling," Economic Modelling, Elsevier, vol. 9(4), pages 385-407, October.
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    Cited by:

    1. Joaquim Bento De Souza Ferreira Filho & Mark Horridge, 2009. "Would Trade Liberalization Help the Poor of Brazil?," World Bank Publications - Reports 28171, The World Bank Group.
    2. Joaquim B de Souza Ferreira Filho & Carliton V dos Santos & Sandra M do Prado Lima, 2010. "Case Study: Tax reform, income distribution and poverty in Brazil: an applied general equilibrium analysis," International Journal of Microsimulation, International Microsimulation Association, vol. 3(1), pages 114-117.
    3. Glyn Wittwer & Mark Horridge, 2010. "Bringing Regional Detail to a CGE Model using Census Data," Spatial Economic Analysis, Taylor & Francis Journals, vol. 5(2), pages 229-255.
    4. James Giesecke & Mark Horridge & Katarzyna Zawalinska, 2010. "The regional economic consequences of Less Favoured Area support: a spatial general equilibrium analysis of the Polish LFA program," Centre of Policy Studies/IMPACT Centre Working Papers g-211, Victoria University, Centre of Policy Studies/IMPACT Centre.
    5. James Giesecke & Mark Horridge & Katarzyna Zawalinska, 2011. "A framework for assessing the economic consequences of the support for Less Favoured Areas within Pillar II of Common Agricultural Policy in a multi-regional CGE setting, with an application to Poland," ERSA conference papers ersa10p872, European Regional Science Association.

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    Keywords

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    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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