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The reform of Brazil’s consumption tax system: A historic achievement

Author

Listed:
  • Jens Mathias Arnold
  • Piet Battiau
  • Falilou Fall
  • Karoline Spies

Abstract

Reforming Brazil’s consumption tax system has long been acknowledged as a crucial policy priority, as the present fragmented system raises the costs of doing business, distorts production chains and obstructs inter-state trade. In late 2023, Brazil successfully passed and is currently implementing a major tax reform that will address the challenges related to the current complex system. Implementing a value added tax system in a federal country that shares the authority to levy VAT among the federal and subnational governments presents challenges. This paper analyses several aspects of these challenges and describes possible solutions, based on the policy experiences of other countries. It also discusses core design features of the new dual value added tax, its management and the transition towards the new regime.

Suggested Citation

  • Jens Mathias Arnold & Piet Battiau & Falilou Fall & Karoline Spies, 2025. "The reform of Brazil’s consumption tax system: A historic achievement," OECD Economics Department Working Papers 1848, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1848-en
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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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