Brazil’s Dual VAT Reform: Achieving Revenue Neutrality Amid Structural Tax Changes

• Brazil’s 2023 VAT reform replaces five overlapping taxes with a dual VAT to simplify and harmonize the tax system.
• The reform aims for revenue neutrality but introduces uncertainty due to deep structural changes.
• The paper estimates new VAT revenues using an adjusted IMF framework, considering sectoral shifts and various scenarios.
• Minimizing the compliance gap is key to achieving revenue neutrality.
• Effective management of input tax credits and full operational integration are essential to mitigate revenue risks and realize reform benefits.

Source: imf.org

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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