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Abstract
This paper analyses the potentials long run effects on the
Brazilian economy of two policies in the field of the indirect taxes: a)
the reduction of indirect taxes on food consumption by the households
and; b) the reduction of indirect taxes on the main inputs used in the
agricultural activity. The analysis is accomplished through two simulation
exercises using a static inter-regional applied general equilibrium
model. The benchmark year is 2001. The results of both simulations
are found to be similar, except in terms of magnitude: the most intense
effects are associated to the reduction the taxation on foods. Both simulations
show expansion in the level of economic activity in the poorest
regions of the country and reduction in the richest. They also show
a potential for improving the welfare of the low income classes in all
regions, especially in the poorest: North and Northeast. The negative
impact on the governments’ revenue is the main restriction to the implementation
of these policies. Results also show that the effects of tax
policies differ among regions, sometimes substantially, what strengthen
the usefulness the interregional applied general equilibrium models for
the analysis of tax policies impacts in Brazil.