Brazil: Federal tax collection totals US$343 billion and sets a record in 2021

RIO DE JANEIRO, BRAZIL – The economy’s recovery and taxes on profits and income ensured record revenue in 2021. According to figures released today (25) by the Federal Revenue Service, the federal government collected R$1.879 trillion (US$343) last year, a growth of 17.36% compared to that recorded in 2020, discounting official inflation by the National Wide Consumer Price Index (IPCA).

The result was slightly above the specialists’ forecast. According to the Fiscal Prism, a monthly survey of market analysts released by the Ministry of Economy, financial institutions estimated the collection of R$1.864 trillion in 2021.

After slowing down in November, tax collection grew in December, totaling R$193.9 billion for the month. This represents a 10.76% increase in relation to that recorded in December 2020, also discounting inflation.

The amount is also a record for the month and was influenced by economic growth and by the increase in the rate of the Tax on Financial Transactions (IOF), in effect since October.

The extraordinary collection of R$40 billion in Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL) in 2021 boosted tax collection last year. This is because companies had higher profits than expected last year and had to pay extra taxes in the adjustment declarations.

According to the new special secretary of the Internal Revenue Service, Julio Cesar Vieira Gomes, the 2021 result should be celebrated because the economy is still under the effect of the Covid-19 pandemic. He said that preliminary data from January indicate the continuation of the recovery in 2022.

“The increase in revenue in 2021 was very meaningful. There is a lot to celebrate considering we are still in the midst of a pandemic. We had a significant increase in taxes on corporate profits and income, as well as personal income tax,” Gomes said.

Another factor that explained the collection increase in 2021 was the decrease in deferrals (tax payment postponements) that took effect in 2020. This reinforced the government’s cash flow by R$19.7 billion in 2021. The increase in the IOF tax rates, which financed the Brazil Aid at the end of last year, contributed with R$2.13 billion.

EXONERATIONS AND RENOUNCEMENTS

Despite the growth in revenues, tax offsets (discounts on previously overpaid taxes) grew in 2021. The tax authorities stopped collecting R$216.31 billion in 2021, against R$189.06 billion in 2020. The increase reached 14.41% in relation to the previous year, also discounting accumulated inflation.

The reduction in the rate of the Social Integration Program (PIS) and the Contribution for the Financing of Social Security (Cofins) on fuels reduced collection by R$2.13 billion last year.

The tax breaks granted by the government resulted in a tax waiver of R$93.75 billion in 2021. The amount was less than the R$101.74 billion recorded in 2020.

Despite the drop in the collection of PIS/Cofins on fuels, the total revenue from these taxes increased 16.47% above inflation last year. This occurred because PIS/Cofins are levied on company revenues and reflected the growth of 5.09% in the consumption of goods and 9.53% in the sale of services in 2021.