Apresenta

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FISCAL FORUM OF BRAZILIAN STATES Share of
Revenue and Intergovernmental Transfers in Brazil
Team Alessandro Melo da Silva Célia Maria Silva
Carvalho Edna Nazaré Cardoso Farage Fernando de
Castro Fagundes Janaína Gonçalves Jonil Vital de
Souza José Carlos dos Santos Damasceno Lourdes
Maria Porto Morais Luiz Márcio de Souza Mª
Alzenete X. Moura Maria Roseana Soares Patrícia
F. Motta Café Paula Mª Bandeira Costamilan Rivael
de Aguiar Pereira Rosana Richa Salame Supervisor
Prof. Sérgio Prado (Unicamp-FGV) Co-ordination
Prof. Fernando Rezende (FGV)
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Objective To analyze and discuss the National
resource sharing and transfer system, aiming to
identify its results, potential problems, and
improvement alternatives.
Focus Spending capacity of each Federated Entity
per Capita (AVAILABLE REVENUE PER CAPITA).
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• Brazilian Resource Sharing and Transfer System
• Return Flows
• ICMS Share, Salário Educação (Education Payroll
  Tax), etc.
• Compensatory Flows
• Kandir Law/ Aux. Exp. (Export Incentive) and IPI
  (Tax on Manufactured Goods) Export.
• Flows for Programs at the national level
• SUS (Unified Health System), FUNDEF/FUNDEB
  (Education Funds)
• Redistributive Flows
• FPE (State Participation Fund) and FPM (Municipal
  Participation Fund).

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• Main Role of Redistributive Transfers
• Mitigate imbalances in spending capacity between
  jurisdictions.
• Current situation
• FPE
• FPE
• Does not consider other revenues
• Frozen indexes
• Does not adjust to dynamics of tax system.
• FPM
• Considers only population dissociated from
  income (interior)
• Population criterion is biased for
  municipalities with small population.

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• Alternatives for Participation Funds
• 1 Unfreezing FPE
• Makes distribution dynamic
• Would a dynamic redistributive flow (Return to
  CTN-National Tax Code) properly fulfill the role
  of mitigating imbalances in spending capacity?

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Alternatives for Participation Funds 2
Equalization Funds

• Definition
• Resource distribution mechanism intended to
  promote horizontal balance (spending capacity per
  capita) among the Entities of a Federation.
• Principles
• Open Account X Closed Account
• Potential Revenue X Actual Revenue (Tax Effort)
• Definition of a REFERENCE VALUE - VR

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EQUALIZATION FUNDS

• Equalization Model Analyzed
• Closed Account (FPE/FPM 2005)
• Actual Revenue
• Reference Value
• Mathematical / statistical method (Mean
  Standard Deviation)
• Exclusion of Extremes (Mean or - Standard
  Deviation)
• Distribution Rules
• 90 Equalization and 10 Tax Effort
• All Federated Entities below VR participate in
  equalization
• Distribution proportional to resources needed to
  reach VR
• All participate in the distribution of the tax
  effort share.

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EQUALIZATION FUNDS

• ADVANTAGES
• Flexible system, which adapts to tax, social, and
  economic changes
• High technical flexibility
• Its main objective is to equalize the available
  revenue per capita, thus promoting horizontal
  balance
• Dynamic system
• It works as an integration mechanism for the
  entire revenue appropriation system
• It gets the best results from the point of view
  of horizontal balance in spending capacity of
  Federated Entities (Available Revenue per Capita).

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RDPC (without FPM)
RDPC (Equalization)
Reference Value