The preview of the tax burden (weight of taxes and other taxes on the economy) fell to 32.44% of the Gross Domestic Product (GDP) in 2023, the National Treasury announced this Thursday (28). In 2022, the same indicator had reached 33.07%, a difference of 0.64 percentage points.
According to the Treasury, two factors contributed to the reduction in the tax burden. The first was the exemption from several federal and state taxes on fuel. Although they came into force in 2022, some of the measures continued to apply in 2023, mainly in state governments. Tax collection on the Circulation of Goods and Services (ICMS) fell 0.45 percentage points of GDP in 2023.
The second factor was the lower payment of Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL) by large companies in 2023. Last year, the collection of these taxes fell due to the reduction of state incentives granted on ICMS in the payment of IRPJ and CSLL.
Called a subsidy, this financial aid was restricted at the end of last year with a new law. Companies will only be able to use this mechanism to deduct investments (spending on works and equipment purchases) and not on running costs (day-to-day expenses).
In 2023, IRPJ collection fell 0.45 percentage points of GDP. CSLL revenues fell 0.21 percentage points.
Another factor that stimulated the fall in the tax burden was the increase in tax compensations from the Social Integration Program (PIS) and the Contribution to the Financing of Social Security (Cofins) by large companies. Through tax compensation, the taxpayer obtains discounts on future taxes to offset taxes previously paid in excess.
Last year, large companies used a 2021 Federal Supreme Court (STF) decision that defined that the removal of the Tax on the Circulation of Goods and Services (ICMS) from the PIS and Cofins calculation base is valid from 2017 Cofins collection fell 0.06 percentage points in 2023, with PIS collection falling 0.01 percentage points.
Spheres of government
The federal government’s tax burden fell 0.42 percentage points in 2023, from 22.41% to 21.99% of GDP. The weight of state taxes fell 0.36 points, from 8.48% to 8.12% of GDP. In municipal governments, tax collection rose 0.14 percentage points, from 2.18% to 2.32% of GDP, driven by increases in the Motor Vehicle Ownership Tax (IPVA).
Economic classification
In 2023, taxes on goods and services fell by 0.51 percentage points of GDP compared to 2022, but remained the most relevant in the Taxes category, with 12.68% of GDP. Next are taxes on income, profits and capital gains, with 8.66% of GDP, a reduction of 0.37 points compared to the previous year.
Property tax collection rose 0.12 points, from 1.59% to 1.71% of GDP. Revenue from payroll and labor taxes rose 0.02 points, from 0.57% to 0.59% of GDP. Taxes on trade and international transactions fell 0.05 points, from 0.59% to 0.54% of GDP.
The weight of social contributions on GDP rose from 8.11% to 8.25% of GDP. The increase of 0.14 percentage points was mainly motivated by the collection of contributions to Social Security, which rose from 5.15% to 5.27% of GDP, driven by the recovery of the job market.
Every March, the Treasury releases its own estimate of the tax burden for the previous year. According to the Ministry of Finance, preparing a preview of the tax burden is necessary because the data is included in the accountability of the Presidency of the Republic. The official number, released by the Federal Revenue Service, will only be released during the second half of the year.
