The economic effects of full ICMS credit compensation on investment in Brazil: the Federal Role

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Abstract

This article analyzes the impact of the immediate and integral compensation of ICMS on the investment through a general equilibrium model. The results suggest positive impacts on the economy, but with a revenue loss of 1.25% for states in the short term. In order to avoid this loss, one solution is to increase transfers from the Union to states and municipalities. In this case, short-term losses are limited to 0.5%, with long-term revenue gains of 0.1% for all federated entities. Removing ICMS on investment may result in long term revenue gains even without any increase in taxation.

Keywords ICMS; investment; capital goods; vertical transfers

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Published

2019-10-11

How to Cite

PAES, N. L. The economic effects of full ICMS credit compensation on investment in Brazil: the Federal Role. Nova Economia, [S. l.], v. 29, n. 2, p. 515–540, 2019. Disponível em: https://revistas.face.ufmg.br/index.php/novaeconomia/article/view/4098. Acesso em: 30 jun. 2024.

Issue

Vol. 29 No. 2 (2019): v. 29 n. 2 (2019)

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Regular Issue

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