TAX REFORM AND MUNICIPALITIES: RISKS AND OPPORTUNITIES IN THE NEW FEDERAL PACT

Abstract

Constitutional Amendment No. 132/2023 marks the beginning of a profound Tax Reform in Brazil, whose main objective is to simplify consumption taxation and make the system more efficient, transparent and equitable. The replacement of five taxes (PIS, COFINS, IPI, ICMS and ISS) by two taxes – the Tax on Goods and Services (IBS), which is a shared responsibility between states and municipalities, and the Contribution on Goods and Services (CBS), which is a federal responsibility – substantially changes the logic of revenue collection and redistribution in the country. This article analyzes the potential impacts of this reform on Brazilian municipalities, with an emphasis on opportunities for regional redistribution and the fiscal and institutional risks associated with the transition.

The study uses a mixed methodological approach, combining quantitative analysis of projections of intergovernmental transfers with a qualitative review of specialized literature and technical documents. The results show that, although the reform favors municipalities in less developed regions through the destination criterion, large urban centers may face relative losses in their own revenue. In addition, the reduction in municipal tax autonomy and the challenges of the long-term transition (until 2078) are elements that require continued attention.

It is concluded that the Tax Reform represents a historic opportunity to rebalance the Brazilian federative pact, as long as it is accompanied by effective compensatory mechanisms, cooperative governance between the federative entities and strengthening of the fiscal management capacity in the municipalities. The implementation of the reform should be monitored with technical rigor and political sensitivity to ensure that tax simplification does not compromise fiscal justice and regional equity.