Local Governments' Tax Burden in Brazil: Evolution and Characteristics

Since the establishment of the 1988 Constitution, there has been a movement of fiscal (and in terms of responsibilities) decentralisation towards local governments in Brazil. Nowadays, since the municipalities have nearly a relevant role in the federation as the states have, it has become more important to carry out a detailed study of their tax burden. From the last year before the Constitution until 2016, the municipalities' tax burden nearly doubled in terms of local taxes collected, and more than doubled in terms of available revenue. The growth even remained after 2011, when the national tax burden took a downwards turn. An assessment using the tax base reveals a regressive municipal taxation, similar to the pattern of the Brazilian tax system as a whole. An analysis by population and by region shows that the direct municipal taxation is more intense in the richer and more populous regions, while available revenue is shown to be more relevant in poorer and less populous regions. Despite the municipalities' remarkable evolution in the Federation, a comparison with other countries shows that there is still room for local governments to expand fiscally.