Tax incentives and fiscal balance in the municipalities of the Governador Valadares Microregion
DOI:
https://doi.org/10.24302/drd.v15.5985Abstract
This article analyzes the effects of federal tax incentives on the fiscal balance of municipalities, focusing on 25 local governments in the microregion of Governador Valadares between 2003 and 2021. A panel data model was applied to assess the relationship between the simultaneous occurrence of IPI, ICMS-export and PIS/COFINS exemptions and the Fiscal Balance Quotient (FBQ). The findings indicate that such incentives, when not accompanied by compensatory mechanisms, contribute to the deterioration of municipal budgetary balance. The research highlights that tax waiver policies, implemented without federative coordination, may restrict local fiscal capacity and compromise the provision of essential public services. It concludes that fiscal policy design must consider territorial impacts and include instruments that safeguard subnational fiscal sustainability
Keywords: tax incentives; fiscal balance; municipal finance.
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