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In the last 30 years, the share of the tax on the movement of goods and services (ICMS) in the tax burden has fallen from 24% to 20% of the Brazilian tax burden. The loss of fiscal space was, on the revenue side, a determining factor of the fiscal imbalance between the federated entities, with a loss for the states, which are the governments that collect the tax. State participation in direct taxes has fallen from 29.6 per cent in 1990 to 27.1 per cent in 2017. In terms of national disposable income, which represents self-collection and compulsory transfers, the share of States has fallen from 27.6% to 25.2%.
The scenario was not worse for the states, because the reduction of its share was more than offset by the increase of the cake, since during the same period, the tax burden had gone from 28.8% at 33%. 7% of GDP.
According to Afonso, the ICMS could improve somewhat its relative position in 2018, but it will be a marginal situation. The data come from a study by economists José Roberto Afonso, Melina Rocha Lukic and Kleber Pacheco de Castro. "The loss of space for the ICMS system was certainly crucial and perhaps the most determining factor of the crisis in the states," said an economist and researcher at the Brazilian Institute of Economics (Ibre / FGV). In the area of expenditure, however, changes in current expenditure, especially staff costs, also weighed on the state crisis. The expected recovery of domestic demand, he said, will not change the tax's evolution. "The problem is not consumption, which is high in the Brazilian economy, even because of a low investment."
The table reflects, Afonso badysis, the obsolescence of the ICMS and the need to revise the taxation of consumption in the country, with a radical transformation (19659002) Afonso recalls that the main basis of calculation ICMS, which is value-added in the industry and agriculture, has a downward trend towards the modern economy, while services, already significant and increasing in the formation of GDP, only contribute indirectly to the collection of the tax, through the taxation of inputs. According to data from the Brazilian Institute of Geography and Statistics (IBGE), the share of services in GDP increased from 67.7% to 73.2% between 2000 and 2017. During the same period, the share of the industry went from 26.7% to 21.5% of GDP,
In the era of the digital revolution, underlines the study, the goods give way to the services, and services are increasingly being replaced by activities involving intangible rights. As a result, there is no chance that the ICMS system will become the important and important tax of the national tax system.
"The future will be worse, it will increase the economy of intangibles.
According to economists' study, this economic reality was compounded by the state's decision to promote regional development By giving incentives to the ICIC's "tax war." According to Afonso, the tax is moving away from its conception as a value-added tax with the excessive application of instruments such as the substitution of tax – when the sector anticipates the recovery of the tax due in the later stages of marketing – and the growing accumulation of taxes.tax credits. "The contradictions in which it is plunged reveal the reversal of the tax. ICMS as a means of taxing consumption, "says the study.
The study of the National Confederation of Industry (CNI) shows one of these contradictions. investigation of the entity with the ten states Brazil's most exporting exporters show the difficulty exporters face in using tax credits from ICMS collected during the process of producing goods sold in the foreign market. The advantage is a means of guaranteeing the exemption of exports provided for by the Federal Constitution and the Kandir Law. However, exporters are not always able to use this important instrument to make Brazilian products more competitive in the foreign market, says Carlos Abjaodi, Industrial Development Director of CNI
One in three companies using the rebate The ICMS system can not receive the benefit, according to the data of the confederation. Indeed, state laws establish rules limiting credit compensation. Thus, for example, none of the ten states has explicit authorization in their legislation to offset the credits accumulated for the ICMS system because of the substitution of taxes. According to the study, states often impose conditions for the use of accumulated credits, that it is a prior Treasury authorization to authorize the use or the transfer to third parties, or a limitation of the compensable amounts. According to the CNI, some states refuse the transfer when the taxpayer is accused of suspending his ICMS debts, as in the case of an advance or judicial examination.
For the CNI, Abjaodi, clearer legislation would alleviate the problem, but a definitive solution must come only with the adoption of VAT. The question of credits to the exporter, according to him, shows the need to rediscuss the tax.
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