Impact of ISSQN on tolls on municipal revenues and expenditures: a spatial panel study

From the mid-1990s, the federal and state governments began to grant a portion of road infrastructure to the private administration through public-private partnerships under the Rehabilitate-Operate-Transfer model. This economic activity constitutes a taxable event for the collection of the Tax on Services of Any Nature (ISSQN), a tax subject to municipal and Federal District jurisdictions. The municipalities adjacent to the extension of the highway in their territories now have an additional source of income. This work sought to analyze the impacts that this specific collection generates on municipal finances, investigating possible strategic relationships between municipalities and their neighbors. Twenty-nine parametric models were estimated in the functional form of Spatial Durbin, 17 relating to Expenditures and 12 to Public Revenues, using the fiscal data available at Finbra. The results indicate that neighboring municipalities change their expenditures mainly with Education and Culture and Transport. They also modify the composition of their revenues, exempting other ISSQN taxpayers.