The Formation of the Public Agenda in the Brazilian Tax Reform: Difficulties, Coalitions, and Impacts

Abstract

The text examines the formation of the public agenda on tax reform in Brazil, focusing on how its central narrative justified the proposed fiscal changes. The reform was presented as necessary for simplifying the tax system but faced resistance from regional and sectoral interests. Tax system distortions reinforced the need for reform. One key issue is the variation in tax rates across states, which increases transaction costs and limits market reach. Additionally, Brazil’s tax system is regressive, with consumption taxes placing a greater burden on lower-income groups. Tax increases have been linked to rising public expenditure, often justified by social spending, which may serve political purposes. This study adopts a qualitative approach, using document analysis and public policy frameworks. The reform incorporates regulatory, redistributive, and distributive policy elements, leading to disputes among groups with conflicting interests. The role of advocacy coalitions, involving actors with diverse or opposing interests, was central to shaping the process. The Executive, Legislative, and various interest groups advanced measures balancing fiscal priorities with political objectives. The findings indicate that tax reform was structured as a strategy to legitimise fiscal changes, with different actors seeking to maximise their gains. Achieving a more balanced tax system requires political coordination to align divergent interests. Without structural adjustments, the reform risks maintaining inefficiencies rather than addressing fiscal imbalances.