Competição tributária regional no Brasil: análise com um modelo EGC inter-regional

Abstract

There is a controversial discussion on the costs and benefits of tax competition policies carried out by regional governments in Brazil. Despite the advances in the international literature over the last decades, there still are very few studies on this issue for the Brazilian federal system. This paper aims to analyze the welfare and economic effects of regional tax competition through a consistent framework based on an interregional CGE model calibrated for two Brazilian regions. The simulation process includes aspects from the theoretical analysis and the role of some characteristics of Brazilian federalism and of the regio¬nal economic structure. The results show a race-to-the-bottom and welfare-improving Nash equilibrium, where gains from private consumption overcome losses from public goods provision. As indicated by a sensitivity analysis, such results would not be different for a fiscal system without vertical linkage or for a closed regional economic system. However, the definition of Nash equilibrium and the welfare results are strongly sensitive to the relative weights of private and public goods in the objective function of regional governments, which are usually conditioned by the dynamics of political cycles.