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Nova Economia

Print version ISSN 0103-6351On-line version ISSN 1980-5381


PAES, Nelson Leitão. The economic effects of full ICMS credit compensation on investment in Brazil: the Federal Role. Nova econ. [online]. 2019, vol.29, n.2, pp.515-540.  Epub Oct 10, 2019. ISSN 1980-5381.

This article analyzes the impact of the immediate and integral compensation of ICMS on the investment through a general equilibrium model. The results suggest positive impacts on the economy, but with a revenue loss of 1.25% for states in the short term. In order to avoid this loss, one solution is to increase transfers from the Union to states and municipalities. In this case, short-term losses are limited to 0.5%, with long-term revenue gains of 0.1% for all federated entities. Removing ICMS on investment may result in long term revenue gains even without any increase in taxation.

Keywords : ICMS; investment; capital goods; vertical transfers.

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