Reform Priorities for Sub-national Revenues in Brazil

This paper surveys the system of sub-national own revenues and the inter- governmental transfer system (including the sharing of oil revenues) in Brazil, highlighting their critical flaws. The latter include heavy reliance on a mixed- origin/destination-based value-added tax and many sub-national governments’ inadequate exploitation of the tax bases assigned to them. The paper then discusses reform priorities, outlining a comprehensive reform strategy and some initial steps that could be taken toward its implementation in the near term, as well as related political economy considerations.