Revenue Sharing: A Problem of Federalism in Brazil

Abstract

This paper shows that the extension and inefficiency of federalism in Brazil is mostly associated with gaps in the competence to tax, as well as to distortions in the system of transfers to States and Local Governments, respectively known as State Participation Fund - SPF and Municipal Participation Fund - MPF. We discuss the concepts of fiscal federalism and decentralization and suggest changes that could contribute to a better distribution of resources and to fiscal discipline.