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The Impact of Tax Substitution on the price of pharmaceutical products in the state of São Paulo

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  • André Luis Squarize Chagas

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Abstract

The mechanism of the Tax Subsitituion has been widely adopted by the Brazilian states in order to simplify tax colletion and combat evasion. Since mid-2007 the São Paulo State Treasury Office began adopting the tax substitution as means of receiving the ICMS due by the pharmaceutical sector. This work seeks to test the effects of the change in the form of taxation on consumer prices. For this, three alternative approaches are used to test the existence of structural break in the series of prices of pharmaceuticals in the state, and the relationship of co-integration of this series with the other states. The results suggest that, after the replacement tax, there was an increase of consumer prices.

Suggested Citation

  • André Luis Squarize Chagas, 2013. "The Impact of Tax Substitution on the price of pharmaceutical products in the state of São Paulo," Working Papers, Department of Economics 2013_19, University of São Paulo (FEA-USP).
  • Handle: RePEc:spa:wpaper:2013wpecon19
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    File URL: http://www.repec.eae.fea.usp.br/documentos/AndreChagas19WP.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    tax substitution; tax incidence; co-integration; structural break;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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