6. Final considerations

This study sought to introduce, concisely and with different approaches, local governments' tax burden in Brazil. Based on the analysis of official statistics, backed up by the previous

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 of the country.

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

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

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 determined vertically.

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 governments have been taking on.

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 intermediate position in this index's ranking.
