On any supermarket receipt in Brazil, much of what the shopper pays is tax that appears nowhere on the paper: it stays hidden in the shelf price. Reversing that logic, by making the cost of taxes explicit to consumers, is one of the promises of the consumption tax reform Brazil enacted in December 2023 and is now implementing. On Thursday (10), about 100 economists, academics, business leaders and former economic officials released an open letter to the presidential candidates asking for support to keep the reform on track, according to reports by G1 and news site Vero Notícias.
Among the signatories are Armínio Fraga, a former president of Brazil's Central Bank; Andrea Calabi, a former head of Banco do Brasil and of state development bank BNDES; steel magnate Jorge Gerdau; former finance minister Maílson da Nóbrega; Vanessa Canado, who advised the Economy Ministry on the tax reform under Jair Bolsonaro; and Rodrigo Maia, a former speaker of the Chamber of Deputies. The mix of names tied to governments of different parties underpins the letter's central claim: for the group, the reform is "an achievement of the Brazilian state, not of a specific government or political party".
What the letter says
The experts call the reform a "great institutional advance" that corrects distortions that badly hurt the "productivity, competitiveness and growth potential" of the country. The core of the model is a dual value-added tax: the CBS, collected by the federal government, and the IBS, shared by states and municipalities, two non-cumulative consumption taxes that will replace PIS, Cofins, ICMS and ISS. In the signatories' view, the design "incorporates the best of international experience in the taxation of goods and services" and was made possible by Brazil's lead in electronic invoices and electronic payments.
"In this context, proposals to revoke or suspend it are viewed with great concern, because they generate uncertainty and undermine the expected benefits of the reform," the document says.
The expected effects listed in the letter include a simpler tax structure with lower costs for companies, a full exemption of investments and exports, less evasion and fraud, the end of the fiscal war between states and municipalities, and a more progressive system that returns part of the tax to low-income families. The signatories admit there are "transition costs", but say the long-term effects are "unequivocally positive". According to G1, the Finance Ministry expects the reform to lift GDP by up to 20.2% over 15 years.
What the candidates say
In his government plan, President Luiz Inácio Lula da Silva of the Workers' Party, who is running for another term in the October election, says the reform increases transparency, ends the cumulative charging of tax on tax and eliminates the fiscal war, citing the exemption of the basic food basket and a cashback scheme for the poorest households. Flávio Bolsonaro of the PL party promises a "revision and resizing" of the reform. "We will correct its distortions, reduce the VAT, currently projected at one of the highest levels in the world, and ensure non-cumulativity, so that tax is not charged on tax," his program says.
The letter ends with a plain request: "we respectfully ask for your support for the continued implementation of the Consumption Tax Reform". Back at the supermarket checkout, what is at stake is the promise of a receipt that shows, line by line, how much tax the shopper paid. Whether that piece of paper ever reaches Brazilian consumers now depends on the direction the October presidential election gives to the reform.