R$ 636 billion: that is how much Brazil's federal government expects to collect in 2027 from the CBS (Contribution on Goods and Services), the new federal consumption tax that replaces PIS, Cofins and part of the IPI starting in January. Like any consumption tax, the money comes out of shoppers' pockets, built into prices. Spread over the year, it averages roughly R$ 20,000 per second.
The estimate is in the 2027 annual budget bill sent to Congress on Monday (Aug 31), according to news outlet G1. Adding the Selective Tax, the so-called "sin tax" that will cover cigarettes, alcoholic drinks, sugary drinks and betting, the new taxes created by Brazil's consumption tax overhaul are projected to raise R$ 677.9 billion next year, reports Folha de S.Paulo. The CBS alone is more than 15 times the R$ 41.9 billion expected from the sin tax and 14 times the R$ 44.8 billion the same budget sets aside for congressional earmarks.
The overhaul, approved by Congress in 2023, swaps five old taxes for a dual value-added system: the federal CBS plus the IBS for states and cities, which phases in through 2033. PIS and Cofins, two federal taxes currently charged on companies' revenue and among those that generate the most lawsuits in Brazil, will be abolished at the end of this year, G1 reports. The IPI, a federal tax on manufactured goods, survives only for products made in the Manaus Free Trade Zone.
What the CBS is
The CBS is a value-added tax (VAT), the model used across most of the world: it is charged at each stage of production, but companies deduct the tax paid in earlier stages. In G1's example, with a 20% rate, a product sold to the final consumer for R$ 100 carries R$ 20 in tax across the whole chain. The change for shoppers is that the tax will be shown separately on receipts, no longer hidden inside the price.
Rate only in December
The budget lists the amounts to be collected, but not the CBS rate. Under the reform's calendar, the Federal Revenue Service has until September 14 to send its calculation proposal to the TCU, the federal audit court; the court has until October 30 to certify the numbers, and the Senate must set the CBS reference rate by December 15. "It is not the Finance Ministry's job to set the rate", Finance Minister Dario Durigan told Folha.
On the size of the new taxes, the committee managing the new system, the CGIBS, estimated in August that the CBS, the IBS and the Selective Tax combined will reach about 28% in 2033, the first year of full collection. That means R$ 28 in tax for every R$ 100 purchased, above the 19.4% average of OECD countries. The government counters that taxes on consumption already total about 34% today, and G1 notes that high consumption taxes hit low-income families hardest, since they spend a larger share of their income on purchases.