Consumption Taxation

Origins, the Brazilian Experience, its Collapse, and the Rationale behind Constitutional Amendment 132/2023

Abstract

The article examines the evolution of consumption taxation in Brazil, from its historical origins to the collapse of the system preceding Constitutional Amendment 132/2023, which entirely restructured this tax base. Initially, it delineates the concept of consumption as a manifestation of income and analyzes the characteristics of indirect taxes, such as the shifting of the tax burden to the final consumer and their regressive nature. It then provides a global historical overview, highlighting the development of the Value-Added Tax (VAT) in France and its international adoption, alongside the Canadian and European experiences. The study further analyzes the flawed choices of the Brazilian model, including the fragmentation of the tax base between goods and services, the adoption of the origin principle, and the lack of economic neutrality, which resulted in a complex, litigious, inefficient, and opaque system. Constitutional Amendment 132/2023 is evaluated as an attempt to overcome these flaws, offering a new opportunity to build a fairer and simpler tax system. The article concludes by emphasizing the importance of learning from the past to avoid repeating historical mistakes and to establish an efficient consumption taxation model in the country.