Tax Reform, Income Distribution and Poverty in Brazil: An Applied General Equilibrium Analysis
Joaquim B de de Souza Ferreira Filho, Carliton V dos Santos, Sandra M do Prado Lima
Dept. Economics, Managment and Sociology, Escola Superior de Agricultura “Luiz de Queiroz”-ESALQ, University of São Paulo-USP, Brazil; Universidade Estadual do Oeste do Paraná – UNIOESTE, Brazil; Universidade Estadual de Londrina – UEL, Brazil
Cite as: J. de Souza Ferreira Filho, C. dos Santos, S. do Prado Lima; 2010; Tax Reform, Income Distribution and Poverty in Brazil: An Applied General Equilibrium Analysis; International Journal of Microsimulation; 3(1); 114–117. doi: 10.34196/ijm.00030
Abstract
This case study considers two frequently advocated approaches to reducing indirect taxation in Brazil: reduction in taxes on food; reduction in taxes on intermediate inputs to agriculture. To asses the effects of both on income distribution poverty levels, a bottom-up general equilibrium model of Brazil (TERM-BR) is linked to a microsimulation model. It is shown that one of the favoured policies is more poverty reducing, the other more income inequality reducing. Perhaps even more importantly, the analysis demonstrates that the two policies lead to very different outcomes in terms of inter-state transfers; a major political barrier to reform in a federal state.
This article contains 2 tables.
Tables
Table 1. Model results
Experiment
1
2
Indirect tax collection loss (millions R$)
−7,009.0
−2,185.0
Poor households (%)
−0.86
−0.46
Poor persons (HR) (%)
−0.91
−0.51
Average poverty gap
−1.46
−0.63
Average squared poverty gap (FGT)
−1.40
−0.64
GINI index
−0.04
−0.06
Households leaving poverty (count)
−135,552
−76,882
Table 2. Model results: Variation in the number of poor households, by income class.
