Brazil’s tax reform faces challenge of keeping rules stable through elections

Brazil is beginning to put a decades-long consumption tax reform into practice after years of debate and negotiations.

The reform introduces two taxes, IBS and CBS, and aims to reduce overlapping taxes, bureaucracy and disputes between states.

One disputed measure, split payment, separates tax from a payment when it is made to help prevent tax evasion and ensure businesses receive tax credits.

The change may put pressure on companies’ working capital, especially at small and medium-sized firms, which are adapting systems and contracts.

The commentary argues that rules should remain predictable rather than become tools in election disputes, while allowing evidence-based improvements.

It suggests credit lines during the transition to address liquidity problems without weakening tax controls, and says the reform should be adjusted without undermining institutional stability.