5. International comparison

On the other hand, the Southeastern, which is known to be more advanced economically and in terms of population, has a higher municipal tax burden from the perspective of direct collection

This pattern of a smaller tax burden in poorer and less populated regions is directly related to a more restricted taxable base, in addition to the costs and administrative difficulties of the collection procedure in small municipalities [5]. Nevertheless, it is possible to affirm that with the arrival of the Public Digital Bookkeeping System (SPED)<sup>7</sup> and dissemination of the use of

Besides the economic and administrative aspects, it is possible to point out yet another contributing factor to the lower municipal tax burden in less affluent locations: the incentive

Established by Decree No. 6022, of 22 January 2007, the SPED is to modernise the current performance of ancillary obligations, provided by taxpayers to the tax administrations and oversight agencies, using the digital certificate for

and a lower available revenue from the standpoint of local governments.

signing electronic documents, ensuring the legal validity of those only in digital form.

Electronic Invoices, these barriers should be reduced.

7

Figure 6. Available revenue per capita population, 2014.

256 Taxes and Taxation Trends

Section 2 of this chapter shows, through official statistics and other authors, that municipalities have had an expressively increased participation in the fiscal federalism in Brazil, especially after the 1988 Constitution, which raised local governments to the level of a federated entity and made them responsible for implementing much of the social policies.

Despite the intense development of municipalities with regard to the decentralisation of resources, the current position of local governments in the national tax burden can expand even more. At least, this is the evidence that emerges from a quick comparison of Brazilian data with the position of countries in the Organisation for Economic Cooperation and Development (OECD), as can be seen in Figure 8.

It can be noted that Brazil's position in the ranking of local governments' participation in the national tax burden is intermediate. With a participation of approximately 6.9% in 2014, the

literature, it was possible to identify that the fiscal decentralisation that has occurred since the Constitution of 1988 has been very favourable to the municipalities, which experienced an increase in direct taxation simultaneously with increased transfers from other levels of government, providing a fiscal autonomy and a role in the federation never seen before in the history

Local Governments' Tax Burden in Brazil: Evolution and Characteristics

http://dx.doi.org/10.5772/intechopen.74808

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Despite gaining ground, there is a debate which highlights that such reallocation of resources in favour of municipalities is not necessarily in line with the elevation of their responsibilities

Currently, the municipalities' available revenue is roughly one-fifth of all taxes collected in the country and is a direct consequence of taxes that have great potential for expansion—as they are founded on the intensification of urban features, more and better services (ISS) and

The broken down data on the municipal tax burden show some of its undesirable characteristics. First, the analysis of the tax base showed that the municipal taxes follow a pattern similar to the Brazilian tax system as a whole, leaning towards highly regressive taxation, which accentuates social inequalities in the country. Second, the analysis of the burden by population shows unbalanced available revenue in favour of the less populous locations, constraining the budget of major centres, which deal with a high demand for public goods and services. A similar feature is noted when the burden is studied by dividing the country into regions. At the same time, the smaller and poorer municipalities have more difficulties to comply with the growing responsibilities of social policies deter-

When dealing with municipalities as federal entities without acknowledging the strong heterogeneity among them (70% of the 5570 municipalities have a population of less than 20,000 inhabitants), the Brazilian fiscal federalism is crying out for adjustments so that there is a suitable balance between the sources of funding and the responsibilities that the local govern-

Finally, it has been shown, based on an international comparison using OECD data, that despite local governments in Brazil having gained plenty of ground in the last 30 years, it is still possible to improve the participation of municipalities in the total tax burden, given their

\*

of implementing the growing social policies defined by the federal government.

increased value of land (IPTU)—as well as increasing transfers.

of the country.

mined vertically.

Author details

ments have been taking on.

intermediate position in this index's ranking.

Angela Penalva dos Santos<sup>1</sup> and Kleber Pacheco de Castro<sup>2</sup>

\*Address all correspondence to: kleberpcastro@gmail.com

1 FCE/UERJ (Rio de Janeiro State University), Rio de Janeiro, Brazil

2 PPGCE/UERJ (Rio de Janeiro State University), Rio de Janeiro, Brazil

Figure 8. Local governments' participation in the National Tax Burden (% of the total), 2014.

country was considerably lower than the OECD average and behind countries that adopt a federal system such as Germany, Canada, USA and Switzerland. The comparison with OECD countries is justified for two reasons: first, the total tax burden of Brazil is compatible with the average of this group [3] and second, the Brazilian government has recently applied to the OECD for membership.
