How Brazil Could Tame Taxes Without Cutting Them

Brazil is known for its complex business environment, and its byzantine tax system is a big reason why. According to the World Bank’s Doing Business rankings, Brazil is the world’s seventh-worst place to have to pay taxes, roughly on par with the Republic of Congo and Bolivia. President Jair Bolsonaro’s government, continuing to tackle some of the most vexing issues facing Latin America’s largest economy, hopes to simplify taxes for both business and ordinary citizens, a goal that eluded prior heads of state.

It’s governed by 5,680 laws and charges thousands of different rates, depending on both the product and the state. For example, the purchase of ethanol is taxed at 32% in Rio de Janeiro but only 12% in Sao Paulo. And those rates change constantly. The country’s tax burden is close to 33% of gross domestic product, a rate that’s considered high by economists. Given the poor state of Brazil’s government accounts and rising debt load, there’s little room to cut taxes. But simplifying them would be an achievement in itself.