The Cost of Direct Taxation on Investment in Brazil

Abstract

This paper analyzed the impact of taxation on the investment in Brazil, focusing on the taxation of corporate income. Following the literature, it was used an economic model to calculate two indicators of effective tax rates - Effective Marginal Tax Rate (EMTR) and Effective Average Tax Rate (EATR). The EMTR measures the increase of the cost of capital due to corporate income tax. The EATR represents a measure of the average tax rate levied on an investment that has a pre-defined economic profit. The results suggest Brazil may face some difficulties to attract foreign investment. The country presents high rates for EATR and EMTR, higher than the average of the rich countries and well above the figures of development countries like Chile, Mexico, South Africa, Russia and China, potential competitors in attracting investments.

The Steel Industry in Global Competition and Limited Capital: A Case Study of the Steel Industry in Bolivia

“…In Canada, there is a tax burden of 4.88% of the total expenses necessary for the implementation of a new steel plant. Additionally, in the comparative tables of taxation between countries, the effect that the incentive of accelerated depreciation represents in terms of income tax savings, since such benefit is conferred in the US, Canada and Chile for the implementation of investments in the steel industry (Paes, 2017).…”