The Brazilian Tax Reform of 2023 (Constitutional Amendment 132/2023) represents a structural response to the countrys chronic fiscal complexity, introduced amid a three-decade deindustrialization trend that reduced the manufacturing sectors GDP share from 27.3% (1985) to 11.3% (2022). This study analyzes the reforms potential impacts on industrialization, focusing on three dimensions: (1) competitiveness gains from eliminating tax cascading via the dual VAT (IBS and CBS); (2) sectoral asymmetries, with benefits for input-intensive industries (e.g., automotive) and challenges for regional regimes (e.g., Manaus Free Trade Zone); and (3) inherent limitations, emphasizing the need for complementary policies in innovation, infrastructure, and workforce training. Methodologically, the research combines documentary review, international comparisons, and critical literature synthesis. The reforms success hinges on mitigating inequalitiesthrough SME training programs, federal compensation mechanisms, and revised regional incentivesand integrating it with industrial policies. The study concludes that while the reform addresses critical distortions (e.g., Brazil Cost), its full potential depends on a coordinated strategy linking tax simplification to investments in technology, logistics, and formalization. Without such measures, the reform risks perpetuating regional disparities and falling short of reversing deindustrialization.
Ribeiro et al. (Mon,) studied this question.
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