The current model for using the system was created in the 1988 Constitution, and was previously known as Tax on Circulation of Goods (ICM). Thus, a new letter was added to compose the expansion of tax collection, now including services and starting to be called ICMS.
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Governors were also granted authority to provide tax incentives, removing this prerogative from the Union. In this way, the states assume their own legislation for the system, with the proper rules for their localities, in order to move the economy.
The tribute returns to the centers of economic debate after the approval of the project that limits the collection of ICMS on fuel, electricity and public transport. The tax levied on the circulation of goods, with a main focus on the communication and transport sectors, ends up being the main tool for collecting profits for the states. In this way, in all purchases, the consumer pays for this tax, whether in supermarkets, on bus tickets or when refueling with gasoline.
Since the ICMS legislation is a state responsibility, measuring the tax burden on goods becomes a complicated task, since each state can apply the tax differentially. The return to the economic debate is built through the importance that the system has on the income of the states, so that, until April 2022, ICMS was responsible for more than half of the states' total revenue, considering a period of 12 months.
In the same period, the revenue of all states plus the Federal District accounted for R$ 1.305 trillion, with part of this sum collected by ICMS, in the amount of R$ 690.4 billion. The sanctioned project limits the ICMS rate at 17% to 18% on fuel, electricity and public transport, and before the value reached the margin of 30% in some states. This sudden reduction in value can generate significant impacts on state coffers, opening up a debate on the tax situation employed and what its consequences for the future.
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