For The First Time, Income Tax Revenue Exceeded ICMS (Tax on Circulation of Goods and Services) Revenue in Brazil

Last Year Was a Positive Period for the Economy, With the Federal Government Benefiting from the Creation of New Jobs. The Improvement in the Economy Was Reflected in Job Generation, Resulting in Greater Momentum for the Country’s Prosperity and Helping to Consolidate Confidence Levels in Government Initiatives.

For the First Time in History, the Federal Revenue from Income Tax (IR) Exceeded the Sum of the Revenues of Brazilian States from the Tax on Circulation of Goods and Services (ICMS). The ICMS Is a State Tax Whose Collection Has Been Considered the Main Tax in Brazil for Many Years.

Initially, 2022 Was a Milestone for Tax Revenue in Brazil. According to the National Council of Tax Policy (Confaz), the Federal Revenue Collecting R$ 710 Billion in Income Tax, About R$ 20 Billion More Than the ICMS, Which Reached R$ 690 Billion. For the Year, This Performance Represented a 3% Growth in Total IR Collection.

In 2021, the ICMS Was Responsible for Collecting R$ 652 Billion in Revenue, While the IR Fell 16% Short, Totalling R$ 561 Billion. This Change in Scenario Draws Attention and Shows That State Taxes Are Fundamental for Brazilian Finances.

The Collection of Taxes from the Federal Revenue Started in 1995 and Confaz in 1997. When Comparing the Data from the 26 Year Common Period of Both Series, the ICMS Was the Main Tax Collected, Reflecting a Tax System Primarily Based on Consumption Taxation.

Amanda Klein and Motta Analyze Solutions for ICMS Collection 

Reduction in ICMS in 2022

The Collection of ICMS Was Boosted by Factors Such as Economic Recovery, Inflation, and the Rise of Commodities Last Year. However, the Tax Rate Underwent a Change During the Same Period, Which Affected the Collection of the State Tax.

In 2022, to Combat Inflation, the Government of Jair Bolsonaro Reduced the Collection of the Tax in Essential Sectors Such as Fuels, Electricity, and Telecommunications.

Income Tax

The Federal Government Benefited from the Economic Recovery Following a Critical Period Due to the Pandemic. The Corporate Income Tax, Which Applies to Company Profits, Was One of the Main Contributors to the Good Federal Revenue Collection.

Additionally, Withholding Tax Also Contributed to the Increase in Labor Earnings. These Factors Were Driven by the Recovery of the Labor Market Last Year, Highlighting Successful Hires Related to Services Provided, Which Were Very Successful in 2022.