Waiver of states with ICMS can grow 42% in 2023 – 04/11/2023 – What tax is this

State governments must give up R$ 228 billion in 2023 with the granting of ICMS tax benefits, which represents almost a third of the projected collection for this tax on goods and services.

The calculations are from Febrafite (Federation of State Tax Inspectors) and represent a 42% growth in waivers compared to 2022, a value well above the estimated 6% increase in tax revenue.

ICMS is the main state tax and part of its collection is allocated to municipalities. A portion of the tax must also be obligatorily applied in areas such as health and education.

Data were collected from state budget guidelines bills and their tax waiver estimate statements.

According to the federation, part of this loss of collection does not refer to the so-called fiscal war, but is related to agreements related to the exemption of basic food baskets, horticultural products, agricultural inputs and agricultural machinery and implements within the scope of Confaz (National Council of Farm Policy).

In 2022, around 60% of the ICMS tax waiver referred to benefits that fuel the tax war between states, according to an estimate by Febrafite.

“This is a significant amount of resources, just over 1% of GDP, which has been renounced with the aim of encouraging certain economic sectors or, eventually, specific companies”, says the entity in a note.

“Since these benefits are granted by all states, to a lesser or greater extent, there is an assessment that the fiscal war would have ceased to have a positive impact on development, even in poorer states.”

The proposed tax reform under discussion provides for the end of ICMS, which today has different legislation in each state and regional benefits.

In early March, the seven governors of the states of the South and Southeast expressed their support for tax reform and requested a review of the states’ debt and expansion of the debate within the scope of the federative pact.

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