Challenges and Limits of Implementing the Income Tax in Brazil

Abstract

The federalism established with the Proclamation of the Republic brought about changes in the country’s tax structure. At the request of state governments, export taxes—the second largest source of tax revenue—were transferred from the responsibility of the central government to the states. The reduction in revenues, combined with the financial challenges imposed by the First World War, required the Ministry of Finance to undertake studies and measures to expand its revenue base. Two measures are particularly relevant in this regard: during the wartime period, new taxes and higher rates were introduced in consumption taxes; the second innovation was the creation of the Income Tax in 1922, during the government of Arthur Bernardes. This article examines the debates surrounding the creation of the Income Tax in Brazil, seeking to understand how the influence of international experiences and authors shaped the model built in the country.