Externe Publikationen

Tax Expenditure Country Report: Brazil

de Renzio, Paolo / Manoel Pires / Natalia Rodrigues / Giosvaldo Teixeira Junior
Externe Publikationen (2025)

German Institute of Development and Sustainability (IDOS) and Council on Economic Policies (CEP)

DOI: https://doi.org/10.23661/cr2.2025

Portuguese version:

Relatório nacional sobre gastos tributáris: Brasil

Tax expenditures in Brazil corresponded to 4.78% of Gross Domestic Product (GDP) in 2023, taking only the federal level into account. If state-level tax expenditures are included, the share reaches 7.2% of GDP in 2023.
Transparency: the Statement of tax expenditures (DGT) is published annually as an annex to the Annual Budget Bill (PLOA), with much detail on tax expenditures (TEs) and the associated methodology. However, some measures that imply forgone revenue are not included in the definition of TEs by the Brazilian Federal Revenue Service (RFB), and these affect the levels of transparency. The existence of TEs at the subnational level further complicates the transparency issue.
Complexity of the institutional framework: There are several complications regarding the definition and estimation of TEs, and the roles and responsibilities of the various actors involved in its formulation, approval, monitoring and evaluation. Many TE proposals are not properly formulated and costed, making the effective use of this fiscal policy tool more difficult.
Evaluation challenges: The impact of policies that involve TEs have not commonly been evaluated, especially because they are not structured in such a way as to facilitate such a task, which requires the clear identification of objectives, indicators and targets. In 2019, the Public Policy Monitoring and Evaluation Council (CMAP) was created to evaluate the impact of subsidies and TEs. The CMAP has already conducted 34 evaluations of indirect expenditures (subsidies), but its recommendations have not yet resulted in concrete changes to policies involving tax expenditures.
Fiscal sustainability: The sheer volume of revenue that the government fails to collect as a result of tax expenditures – estimated at 6.9% of GDP for 2024, including state-level TEs – points to the need for reforms to help reduce the negative impact of TEs on public accounts and on fiscal sustainability. Reforms should include a clear assessment of the benefits that TEs bring, including in relation to economic development and inequality.
Recommendations: Improve and standardise the definition of TEs – including all measures that imply forgone revenue – and the related calculation methodologies; standardise the presentation of revenue forgone at the state level and standardise the calculation methodology to enable the creation of a single, comprehensive database; create mechanisms to incorporate the results of CMAP evaluations into the formulation of public policies; include initiatives in the ongoing tax reform process to reduce and rationalise tax expenditures, coordinated between the different levels of government.