National Treasury Awards: FGV study on tax reform wins first place
Award-winning article analyzes impacts of tax reform on consumption in Brazil.

A study titled “Indirect tax reform in Brazil: Firm dynamics, informality and the Simples Nacional tax regime,” by Gil dos Santos Navarro, doctoral student at the Brazilian School of Economics and Finance (FGV EPGE), Professor Aloisio Araújo of FGV EPGE and Thiago Sevilhano Martinez, who has a doctorate from FGV EPGE, came first in the “Public Finance Papers” category in the 29th National Treasury Awards. The prize was presented at an awards ceremony held on December 4 in Brasilia.
The study explores the economic effects of the recently approved tax reform on consumption. The researchers developed a model with heterogeneous firms that choose between operating as formal, informal or in the Simples Nacional tax regime. The model was calibrated to estimate the impacts of the reorganization of tax rates and simplification of the tax system, incorporating various aspects of the Brazilian system and the reform.
Here are the study’s main findings:
- Effects on GDP: The model estimates a potential 4.5% increase in GDP: 2.5% attributed to the rebalancing of tax rates between sectors and the remaining 2% attributed to simplification of the tax system.
- Informality and Simples Nacional: The study highlights that informality and the Simples Nacional tax regime limit the economic gains of the reform, reducing its potential efficiency.
- Differentiated tax rates: The adoption of specific tax rates for each sector, although less simplified, was pointed out as a relevant factor for aggregate gains, especially benefiting sectors with more productive firms.
“We incorporated informality and the Simples Nacional tax regime into the model, taking into account differences between sectors and different scenarios. This allowed us to explore how the reform, by simplifying the system and adjusting tax rates, may generate significant economic gains. We also identified limitations imposed by maintaining regimes such as Simples,” Navarro said.
The National Treasury Awards are organized by the National Treasury Secretariat and are supported by FGV, the Inter-American Development Bank and the National Public Administration School. The aim is to promote scientific research in public finance and expand the frontiers of knowledge in this area.
To find out more about the awards and previous winners, click here.
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