The Impact of Tax Substitution on the price of pharmaceutical products in the state of São Paulo

André Chagas

No 2013_19, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: The mechanism of the Tax Subsitituion has been widely adopted by the Brazilian states in order to simplify tax colletion and combat evasion. Since mid-2007 the São Paulo State Treasury Office began adopting the tax substitution as means of receiving the ICMS due by the pharmaceutical sector. This work seeks to test the effects of the change in the form of taxation on consumer prices. For this, three alternative approaches are used to test the existence of structural break in the series of prices of pharmaceuticals in the state, and the relationship of co-integration of this series with the other states. The results suggest that, after the replacement tax, there was an increase of consumer prices.

Keywords: tax substitution; tax incidence; co-integration; structural break (search for similar items in EconPapers)
JEL-codes: C32 H22 I18 (search for similar items in EconPapers)
Date: 2013-11-26
New Economics Papers: this item is included in nep-iue and nep-pbe
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