The investigation shows that, if the objective of the controversial Selective Tax is to change behavior and inhibit vices, the results can only be achieved with a high rate and a broad base of incidence of the product
BRASÍLIA – The potential for conflict that can be generated by the adoption of Selective taxone of the themes more controversial brought with the tax reformmotivated the Observatory on the Brazilian tax system evaluate the functioning of the “sin tax” abroad. The study, anticipated Station/Broadcast, concluded that this tax works, impacts consumer behavior and raises government revenue, but, to be effective, it must have a high rate and a broad base of impact. The study also recommends improvements to the law regulating the tax in Brazil, with the inclusion of more products in the list of surcharges and the constant reevaluation of that list.
To understand the international experience of the Selective Tax free from sectoral pressures, the Observatory analyzed 31 high-impact scientific articles. “Increasing the price of products has a significant impact on consumer behavior when the tax rate is higher. In general, with a higher tax rate and a broader calculation basis, the effects (consumption reduction) are achieved with less significant consequences,” says Francisco Tavares, coordinator of the Observatory, an initiative of the Sindifisco Nacional, the body representing tax auditors at the Federal Revenue Agency, and the Federal University of Goiás (UFG).
The team’s assessment also shows that the effectiveness of the sin tax is linked to coordination with other public policies. An example comes from Mexico: although the country has managed to reduce the consumption of drinks with a high sugar content and foods with an excess of carbohydrates due to increased taxation, effective results have not been achieved in reducing obesity, due of the substitution effect. Furthermore, even if the function of the selective tax is not to raise revenue, the calibration of the rate will have effects on both inhibiting consumption and maintaining revenue for governments.
“These taxes must be combined with other public policies and evaluated periodically to calibrate these effects. There may come a time when the state relies on those revenues and expects a certain level of consumption of the products. Selective taxes are not policies that can work consistently , need to be re-evaluated,” he says.
The observatory also found no concrete evidence that the collection of the selective tax on certain products is related to the increase in illegal trade of that same item.
Changes in Brazil
The Brazilian selective tax will apply to some products harmful to health and the environment. “If there is one aspect of the tax reform that is very shy of the initial objectives, it is the selective taxation on activities and production factors harmful to health and the environment. Brazil had the opportunity to follow what the whole world has done for the selective tax, that is, the tax on greenhouse gas emissions. The most we have achieved with this project has been with vehicles, and still in a problematic way,” he said, also citing the absence of this tax on vehicles. ultra-processed foods.
In addition to expanding the list of taxable products, Tavares defends the introduction of a mechanism for constant evaluation of the list of taxable items and the related rates, along the same lines as the revision of tax expenditure, already determined by the reform. “The monitoring and evaluation elements tend to solve lobbies because they have parameters, data and variables that become objective. This would be an important addition,” he said.
Source: Terra
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