Explaining Brazil #275: Santa brings Lula a tax reform

The Brazilian Congress has finally approved a tax reform, after decades of discussions. Boiled down, the reform merges multiple consumption taxes into two VAT-like levies, one at the local level and one at the federal level.

It is by far the most consequential piece of legislation discussed in Congress this year — and it will have a massive impact on the Brazilian economy as a whole.

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In this episode:

• Mario Sergio Lima is a senior Brazil analyst at Medley Global Advisors, and a columnist for The Brazilian Report.

Background reading:

• A lot of the debate on (and criticism of) Brazil’s tax reform has been centered around how high the value-added tax rate will be. But that discussion misses the point of the reform entirely — the main upside is simplifying a madhouse of a tax code.
• Tax lawyer Vinícios Leôncio spent more than two decades of his life compiling Brazil’s tax laws into a single book. The finished article had almost 50,000 pages.
• Brazil’s Industry and Trade Development Ministry drafted a plan to reduce the cost of doing business in the country. Step one should be getting the tax reform approved in Congress.
• After the tax reform was approved, S&P upgraded Brazil’s credit rating.
• The six states in the wealthy South and Southeast regions announced they would raise their standard tax rate on goods and services out of fear that the tax reform will cost them revenue.

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The post Explaining Brazil #275: Santa brings Lula a tax reform appeared first on The Brazilian Report.