States raise ICMS tax to cover pension deficit.
Almost all states in the federation increased the ICMS (Tax on the Circulation of Goods and Services) to compensate for losses caused by the disastrous economic policies of Michel Temer; however, most of the money collected was not allocated to operating expenses or investments, but to the payment of public employee pensions. This protocol has left billion-dollar holes in state budgets.
247 Almost all states in the federation increased the ICMS (Tax on the Circulation of Goods and Services) to compensate for losses caused by the disastrous economic policies of Michel Temer. Most of the money raised, however, was not allocated to operating expenses or investments, but to paying for civil servants' pensions. The protocol has left billion-dollar holes in state budgets.
A report from the Folha de S. Paulo newspaper. highlights that "nOver the past four years, the pension deficit in the states has practically doubled and is rapidly approaching R$ 100 billion. Between 2014 and 2017, the average annual growth of inactive individuals in the states was approximately 6%. This trend is accelerating, and in the next ten years, almost half of those still working may retire.
And it adds: "In the 12 months between September 2017 and August 2018, expenses with retirees jumped again, by 8%. By comparison, the increase in spending on active employees was 0,9% in the period, according to Ipea (Institute for Applied Economic Research). Meanwhile, state ICMS (a Brazilian sales tax) revenue increased by almost 5% last year, well above the economic growth projected at 1,3% by the Central Bank. In addition to increased revenue from the slight economic recovery, states such as São Paulo, Rio de Janeiro, Rio Grande do Sul, and Pernambuco, among others, have raised the ICMS (state sales tax) on items such as meat, vehicles, beverages, electricity, fuel, and telephone services.