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How indirect taxes impact Brazilians' pockets: understand the tax burden you pay without realizing it.
The issue of taxes is a constant concern for Brazilians. However, many are not aware that, contrary to what many people think, Brazil is not among the countries with the highest global tax burden. Instead, it is one of the countries with the highest concentration of indirect taxes. These taxes are not directly visible, which means that most Brazilians pay taxes without realizing it.
Indirect taxes: how do they work?
Os taxes Indirect taxes are all those that are included in the consumption of goods and services. This means that the cost of these taxes is passed on to consumers, and not directly to those who earn income or have assets.
In other words, these taxes are included in the prices of products and services we buy every day, such as food, clothing, furniture and various services.
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In Brazil, around 49,7% of taxes are indirect, according to data from the National Association of Federal Revenue Auditors (Anfip).
This form of collection means that many Brazilians do not realize how much they are paying in taxes.
The indirect tax burden can significantly impact family budgets, especially those with lower purchasing power.
Main indirect taxes in Brazil
The four main taxes indirect in Brazil are:
- Tax on the Circulation of Goods and Services (ICMS)
ICMS is a state tax levied on the circulation of goods and the provision of transport and telecommunications services.
Each Brazilian state can adopt its own collection rules, which means that the ICMS amount varies from region to region.
This tax is present in practically all commercialized products and services, including food, electronics and transportation and telecommunications services.
- Service Tax (ISS)
ISS is charged on the provision of services, both by companies and self-employed professionals.
It covers a wide range of services, from beauty services such as haircuts to professional services such as consulting and medical care.
ISS charges can be found in practically all sectors that provide services, reflecting its importance in tax collection.
- Tax on Industrialized Products (IPI)
IPI is a federal tax applied to industrialized products, whether national or imported.
This tax affects items such as cars, household appliances, alcoholic beverages and hygiene and beauty products.
The incidence of IPI is notable in many daily consumption products, contributing to the indirect tax burden.
- Import Tax (II)
II is applied to imported goods and luggage of travelers coming from abroad.
This includes a wide range of products, from clothing and accessories to electronics and toys.
The application of this rate reflects the complexity of international transactions and the impact of imports on the final cost of products in Brazil.
Impact on the lives of Brazilians
The impact of taxes indirect costs is significant, especially for Brazilians with lower incomes. To illustrate, consider the purchase of a cell phone that costs R$1.000.
Of this amount, around R$400 is allocated to taxes, representing a considerable tax burden.
This cost can weigh disproportionately depending on the consumer's income bracket.
For a daily worker who earns R$2.200 per month, the R$400 in taxes represents approximately 20% of her income.
In contrast, for a sales manager who earns R$16.500, the same amount corresponds to just 2,5% of his income.
This example clearly demonstrates the regressive nature of the tax system, where indirect taxes have a heavier burden on those with fewer resources.
In addition to indirect taxes, there is also inequality in the distribution of direct taxes, such as IPVA and IPTU.
Families with a low income allocate a higher percentage of their income to them compared to wealthier families.
For example, while a family with a minimum wage spends on average 3,46% of its income on IPVA, a family with an income above 36 minimum wages spends only 0,68%.
The same happens with IPTU, where the rate represents 1,62% of the income of a poor family and only 0,65% for a rich family.
These discrepancies highlight the inequality in the Brazilian tax system, showing how indirect and direct taxes disproportionately affect different layers of the population.
The concentration of the tax burden on indirect rates contributes to a greater burden on consumers, especially those with lower incomes, and perpetuates economic inequality.
