Fiscal reform and federal relations: Brazilian deadlocks
Brazilian Journal of Political Economy
Brazilian fiscal reform got to deadlocks because proposals tried to avoid considering federal relations. There are two main types of federal relations: the competitive and the cooperative. In both types is possible to observe coordination mechanisms. Brazilian federalism is a mixture of both types what leads to difficulties finding solutions. We argue that is more important to find mechanisms to facilitate cooperation than to discuss the qualities of any alternative fiscal structure. Fiscal
... ructure. Fiscal reforms brings along a great deal of uncertainty. So it is important to discuss the reform timing and the compensation mechanisms before hand. Brazilian tax burden is amazingly high even when compared to developed countries contrary to the results often found for developing countries. In the beginning of the 90's Brazilian tax burden was 25% of GdP and by 2004 it was more than 32.8% of GdP 1 . This could indicate that Brazilian fiscal structure has no problems. However, the means by which this high burden was achieved is considered to be really damaging to Brazilian productive structure and also not favourable for cooperation among levels of government. There is consensus between annalists that a significant fiscal reform is long needed. However after the stabilization in 1994 all the attempts to implement a broad reform have failed. Fiscal reform debate has avoided discussing the problems of federal relations be-1 This figure is the current result after the revision made by IBGE in 2005.