Is it possible that Brazilian inflation be affected by taxation?

Abstract

This paper presents empirical evidence for the Brazilian economy of the effects of taxation on inflation. Thus, tax shocks (indirect and direct on capital and labor income) were inserted into different versions of the Phillips Curve (backward-looking, forward-looking, and hybrid). The results obtained by GMM and VAR methods show that taxation impacts on Brazilian inflation in different ways. For this reason, the tax impact should be considered by the monetary authority, given that tax variations are capable of promoting shocks on inflation.