THE fiscal war – also called War of Places – is a concept that concerns the dispute between different places to attract companies, industries and investments. This competition to attract companies is even considered a common socio-spatial issue. The problem arises when such a dispute becomes exaggerated, with an excessive granting of incentives or even illegal practices by the government, which creates a series of difficulties with collection.
At causes of the fiscal war in Brazil focus on three main factors:
The) the freedom of the states of the Union to regulate their own fiscal policy, especially regarding the collection of the ICMS (Tax on Circulation of Goods and Services). This tax, in addition to other charges and fees, is now reduced or even exempt for a period determined to ensure that large companies or industries move to a given location to generate jobs.
B) the historical process of concentration of investments and industries in a few regional areas of the country. With this, the regions most lacking in investments and even infrastructure to generate jobs and collection began to "appeal" for measures - some even unconstitutional - to attract companies and capitals.
ç) the economic opening and the search for maximum investment by foreign groups in the country, which generated greater competition between places to receive these investments.
We can say that these terms are the main, but not the only factors that contribute to the intensification of the Fiscal War in Brazil over the last few years. Large companies, hoping to increase their profits and reduce costs, opt for those places that, in addition to infrastructure for production and rapid transport, also offer a lower load of taxes.
This issue becomes highly problematic when a high value in taxes is no longer transferred to power public, which raises the problems, above all, of the federative units of the country in achieving a greater balance of their bills. To balance the equation, in many cases, the government starts to reduce investments in sectors of society, often including health and education. So we can say that one of the main consequences of the Fiscal War is the decrease in public investments in social structures.
Do not stop now... There's more after the advertising ;)
Edgar Vasques' critical charge to the Fiscal War in Brazil *
There is even a certain consensus that the Fiscal War is a serious problem for Brazil. However, the ways to fight this issue are the target of several disagreements between businessmen, financial and political analysts and even the public authorities. The propositions are as varied as possible and range from theses that defend the national unification of the ICMS and the end of fiscal freedom of the states to measures that claim total control by the Federal Government over investment sites and infrastructure available.
Within the scope of the National Congress, since 1990, several proposals in terms of legislation have been carried out to combat the War of Places. However, little progress was made in this period, since disagreements around the terms and, mainly, the conflict of different interests always hampered this discussion. Even today, we can say that there is no effective policy to contain the Fiscal War in Brazil.
In practice, then, it continues to occur and, in a way, was one of the determining factors for the relative industrial deconcentration experienced by the country since the end of the 20th century. Companies, mainly in the food and automobile sectors, moved from the Southeast to other places, such as the Northeast and Midwest regions of the country. In theory, this concentration would favor the country to better distribute income between places if they were not the heavy concessions promoted, which burden states and municipalities more than offering advantages for the Brazilian economy.
____________________________
* Credits: cartoon published in the magazine "Bens & Serviços", Porto Alegre/RS, apr. 2013 and available on author's website.
By Me. Rodolfo Alves Pena
Would you like to reference this text in a school or academic work? Look:
PENA, Rodolfo F. Alves. "Tax War in Brazil"; Brazil School. Available in: https://brasilescola.uol.com.br/brasil/guerra-fiscal-no-brasil.htm. Accessed on June 27, 2021.
Economy and Finance
ICMS, what is ICMS, how ICMS is calculated, criteria for calculating ICMS, principle of essentiality, Kandir Law, on what ICMS is levied, the need for invoices, taxes.
