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March 26, 2019
Subsidies and Tax Expenditures in Brazil
Cepal
Mansueto AlmeidaSecretary of Brazilian National Treasury
2
Summary
1. General Overview
2. Tax Expenditures
1. Subsidies – BNDES and Student Loans
4. Agriculture
5. Measures
1
2
3
4
5
3
1 Cenário MacroeconômicoSubsidies and Tax Expeditures in Brazil: General Overview
Source: Ministry of the Economy of Brazil
1
1.0 1.3 1.51.0 0.6 0.8 0.7 0.7
1.2 1.2 1.4 1.12.1 1.8
1.3
2.0 1.82.0 2.7
2.42.9 3.5 3.5
3.5 3.84.2 4.5
4.54.2
4.13.0 3.13.5 3.7
3.13.7
4.2 4.24.7 4.9
5.6 5.5
6.76.1
5.4
Subsidies (implicit and explicit) Tax Expenditures Series3
In % of GDP
4
1. Tax Expenditures – Lower creation of programs, with reduced fiscal impact 2
Source: Brazil ian National Treasury
32 32
92
60
51
125
14
8
1312
29
23
30
53
6
1
0
5
10
15
20
25
30
35
40
0
10
20
30
40
50
60
70
80
90
100
2010 2011 2012 2013 2014 2015 2016 2017 2018
R$
bill
ion
Nu
mb
er
of
ne
w p
rogr
ams
Forecasted Tax Expenditures of New Programs
Number of new programs 4-year cumulated impact of new programs
5
1. Tax Expenditures – Comparison to Latin America2
Source: Centro Interamericano de Administração Tributária (CIAT)
Tax Expenditures, as % of GDP
Country Latest Data (t-2) (t-1) t
Colombia 2014 - 0,60% 0,70%
Bolivia 2013 1,00% 1,20% 1,30%
Paraguay 2012 1,90% 1,70% 1,70%
Peru 2016 2,20% 2,30% 2,20%
Guatemala 2015 2,60% 2,50% 2,50%
Panama 2013 - - 2,70%
Argentina 2016 2,50% 2,90% 2,80%
Mexico 2016 3,30% 2,90% 2,90%
El Salvador 2013 3,10% 2,90% 3,00%
Average - 3,50% 3,60% 3,50%
Ecuador 2014 4,70% 4,70% 4,10%
Chile 2016 4,30% 4,50% 4,30%
Brazil 2016 4,50% 4,80% 4,40%
Costa Rica 2016 5,10% 5,20% 5,10%
Nicaragua 4,80% 5,00% 5,50%
Uruguay 2014 6,60% 6,40% 6,30%
Dominic Republic 2016 - 6,80% 6,60%
6
1. Reduction in Subsidies – Student Loans3
* Forecast
• FIES – government program of student loans – was
remodeled to assure its sustainability and limit costs,
which were on a unsustainable path, threatening the
continuity of this important public policy
Primary Balance Impact of FIES – 2010 to 2017 –R$ Billion – Current prices
Cumulated primary balance impact of FIESfrom 2010 to 2017 amounted R$ 36 billion
!
Source: Brazil ian National Treasury
0.9
1.6
3.3
4.8
6.3
5.8
7.0
6.2
2.83.3
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*
7
1 Cenário MacroeconômicoSubsidies – Evolution of subsidies to BNDES3
Source: Ministry of the Economy of Brazil
Outstanding loans to BNDES Annual Subsidies to BNDES(R$ billion of 2018)
312 14 16 15 12 12
42
142
251
309
374
426
505 524
440416
307
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
200120022003200420052006200720082009201020112012201320142015201620172018
% o
f G
DP
R$ billion % of GDP
0.4
4.7
8.06.7
8.310.3
11.910.4
6.6
4.0
7.8
13.8
16.217.8
14.5
27.4
23.0
31.9
16.1
5.0
0.0
8.2
18.5
24.2 24.5 22.8
37.7
34.9
42.3
22.7
9.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Explicit Implicit Total
8
1 Cenário MacroeconômicoSubsidies – Frontloading of BNDES payment schedules to Treasury3
Source: COGEF/Ministry of Economics
Duration Before Renegotiation: 21 yearsDuration After Renegotiation: 9 years
0
5
10
15
20
25
Schedule of Payments from BNDES to National Treasury, in Present Value (US$ billion)
Before Renegotiation After Renegotiation
9
1 Cenário Macroeconômico
3.7 5.1 4.8 6.0 5.48.7
5.0 5.2 4.2 4.4
3.5
4.6 3.9
8.111.6
11.6
4.56.2
5.5 5.67.3
9.68.6
14.1
17.0
20.3
9.5
11.49.7 9.9
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
Subsidies to Family Agriculture Subsidies to Business Agriculture
R$ bilhões
Agriculture – Reduction in Subsidies 4
Source: COGEF/Ministry of Economics
Annual Subsidies to Agriculture(in R$ billion)
10
1 Cenário MacroeconômicoPublic Policies Evaluation in Brazil• The Interministerial Governance Comitee
(CIG) is formed by Ministry of Economics,Chief of Staff e Ministry of Compliance.
• CIG advises the President with governancepolicies in the Federal Administration.
• Brazilian institucional background for publicpolicies evaluation comprises alreadyexistent units in government bureocracy.These units plan the schedule of publicpolicies evaluation, execute thisassessment, suggest the revision ofpolicies, including changes in the legalframework, and spread the culture ofpublic policies evaluation, both ex ante andex post.
Source: SECAP/Ministry of Economics
CMAP -Internal Regulation nº 102/2016
CIG - Decree nº 9.588/2018
CMAP - Internal Regulation . nº 102/2016
5
Chronology of the instituinalization ofPublic Policy Assessments in Brazil
Evaluation Guide Ex Ante and Ex Post
Strategic Policies Evaluation
Council for Evaluation
andMonitorig
Sectoral Policies Evaluation
SectoralOrganisms
Training Programs
GovernmentSchools
Interministerial Governance Comitee
11
1 Cenário Macroeconômico
CMAP Council for Evalutation and
Monitoring, with members ofMinistry of Economy, Ministry ofState and Ministry of Compliance
CMAG Members of the Ministry of the
Economy, Office of the President and Ministry of
Compliancy
CMASMembers of the Ministry of the
Economy, Office of the President and Ministry of
Compliancy
• Approves the schedule of evaluation
• Notify CIG with agenda and results
• Proposes changes in the normative
Evaluates public policies financedby federal sources or federal funds
Evaluate public policies financed byfederal subsidies (tax breaks, implicitand explicit subsidies
Composition of the Council of Evaluation and Monitoring - CMAP5
12
1 Cenário Macroeconômico
• The Budgetary Guidelines Law (LDO - 2019) has a goal of stablishing a cap of 2% of GDP for Tax Expenditures in tenyears.
• For comparison, in 2017 it reached 4,1% of GDP.
• According to the §§ 3º e 4º of article 21 of LDO 2019:
Source: SECAP/Ministry of Economics
Revision of Tax Expenditures and subsidies5
§ 3º O Chefe do Poder Executivo encaminhará ao Congresso Nacional plano de revisão de despesas e receitas, inclusivede incentivos ou benefícios de natureza financeira, tributária ou creditícia, para o período de 2019 a 2022, acompanhadodas correspondentes proposições legislativas e das estimativas dos respectivos impactos financeiros anuais.
§ 4º O plano de que trata o § 3º e as correspondentes proposições legislativas: (...)III - no que tange às receitas:a) priorizarão medidas voltadas à redução de renúncia e ao aumento de receita, ao combate à sonegação, à
progressividade tributária e à recuperação de créditos tributários; eb) estabelecerão, em relação aos benefícios tributários:1. prazo de vigência para cada benefício; e2. cronograma de redução de cada benefício, de modo que a renúncia total da receita, no prazo de 10 (dez) anos, não
ultrapasse 2% (dois por cento) do produto interno bruto.”