Emergency Aid brought relief – at least momentarily – to the cash of most states. With the benefit, responsible for boosting consumption in the country in recent months, 14 governors observed an improvement in the collection of the main state tax, the Tax on Circulation of Goods and Services (ICMS).
In some states, the gain in the collection of ICMS in the months analyzed exceeded 10% compared to the same period in 2019, shows a survey carried out by the Brazilian Federation of State Tax Inspectors’ Associations (Febrafite) and by the Brazilian Institute of Economics of the Getulio Vargas Foundation (Ibre / FGV).
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Emergency Aid helped in the collection of states – Photo: Reproduction / Agência Brasil
Of all that is collected directly by the states, the ICMS is responsible for about 80%.
The study compares the data for July and August this year with the same period in 2019. The figures have already been corrected for inflation and cover the months when the economy’s reopening began to be more intense across the country.
Although the country faces economic difficulties because of the crisis caused by the pandemic of the new coronavirus, Emergency Aid has given a boost to the budget of Brazilians, especially those with lower incomes, and has resulted in increased consumption.
The impact of the aid has been evident in the country’s indicators. In August, for example, retail sales grew for the fourth month in a row and have already eliminated losses from the pandemic, according to the Brazilian Institute of Geography and Statistics (IBGE).
Retail sales increase 3.4% in August
By the end of the year, the Federal Government should pay R $ 322 billion with the benefit.
“People with less purchasing power are less likely to save. In other words, they receive and already go to consumption”, says the president of Febrafite, Rodrigo Spada. “And this impacts the collection of ICMS”, he says.
- Majority of beneficiaries use emergency aid to buy food, says Datafolha
- Without emergency aid, about 6.6 million households would have a monthly income per capita of R $ 12, says IBGE
The greatest increases in tax collection were observed in the states of the North, Northeast and Midwest. Proportionally, the population of these regions benefited most from the distribution of Emergency Aid.
“The states of the North and Northeast are also the most impacted because the economy there is smaller. And because, proportionally, low-income families are in greater proportion in these states,” says Spada.
In the individual analysis of the states, the biggest increase with the ICMS occurred in Roraima, an increase of 17.38%. Next came Mato Grosso (12.68%) and Pará (12.55%). The worst performances were observed in Acre (-23.91%), Piauí (-8.95%) and Rio Grande do Norte (-6.9%).
In total, between July and August, the 26 states and the Federal District raised R $ 85.5 billion with ICMS, up from the R $ 83.3 billion collected in the same period last year.
In addition to each state having a different dependence on aid in the local economy, factors such as the incidence of the disease, degree of social isolation and level of tax evasion help explain the difference in the variation in the collection of ICMS, according to the researchers.
“The Emergency Aid allowed the situation to be alleviated and that the collection figures of the states were not worse,” says Juliana Damasceno, a researcher at Ibre.
Collection of ICMS – Photo: Economy / G1
In the states of the Midwest, the good performance of agribusiness, with the increase in rural income and the impact on the local economy, also contributed to the improvement of the ICMS.
The relief in the cash of the states, however, should be momentary. The reduction in the amount of Emergency Aid – from R $ 600 to R $ 300 – and the uncertainty as to whether the federal government will continue with a similar program next year should have a negative effect on the collection.
Without Emergency Aid and high unemployment, analysts estimate that consumption should lose strength over the next few months, which will impact the ICMS.
“From now on, the concern that all states have is precisely what is the capacity of the economy to fly without needing this consumption stimulus, which the Emergency Aid represented”, says Juliana.
Before the pandemic, states were already facing a very difficult situation in public finances. And, to cope with the health crisis, the governors interrupted the fiscal adjustment process, renegotiated the debt with the Union and received additional resources from the federal government.
Without the impetus raised by Emergency Aid, the question among experts is how the states will find resources to finance public services in a period of extreme need.
“The effects of the pandemic are not just health, they are social, and will not end in December this year”, says Juliana. “What we are able to identify is that some needs will continue to exist and will need to be assisted in 2021 and even for other years, depending on the recovery of the economy.”