Poverty and Inequality Implications of Fiscal Policies : The Case of Brazil

This paper investigates the impacts of the Brazilian fiscal system on poverty and inequality,with a focus on the effects on vulnerable populations. Leveraging a broadly applied and accepted methodology andseveral household surveys and administrative data, the paper shows that Brazilian fiscal policies in 2019 were typicallypoverty- and inequality-reducing, but with a large heterogeneity in the effectiveness of fiscal tools. Thepoverty impacts of fiscal policies increased over time due to direct transfers. Income inequality reduction is amongthe highest in a comparable set of middle-income countries, yet the post-fiscal Gini is still high at 0.521. The resultsindicate that elderly people are the largest beneficiaries of the fiscal system and households with children experiencea smaller decline in poverty from government transfers compared to those with no children. At the individual level,the findings also show that children and young adolescents (ages 0–15) were made poorer after taxes and transfers,which suggests that Brazilian fiscal policies in 2019 also increased poverty rates for some population groups. Thesefindings contribute to provide a comprehensive overview of the fiscal system in Brazil and have wide-rangingconsequences for the formulation of public policies.