Abstract

In late 1997, the Brazilian government announced the first version of a tax
reform contemplating a complete overhaul of the indirect taxation in the country. Turnover
taxes were to be eliminated and the entailing loss of revenue compensated by a new
federally coordinated broad-based VAT, that would replace the present incoherent state
VATs and the largely mismanaged service tax imposed by local-governments. In this article,
simulation models are used to study the consistency of the proposed reform and some of its
possible consequences. A risk analysis framework is used to underline the most important
uncertainties involved.

JEL Classification: E22; E21.