The report analyses several aspects of these challenges and describes possible solutions, based on the policy experiences of other countries. It also discusses core design features of the new dual value added tax, its management and the transition towards the new regime.
The OECD has published a report titled “The reform of Brazil’s consumption tax system” on 10 November 2025, outlining both the milestones reached and the ongoing challenges in reforming Brazil’s consumption tax system.
Brazil’s 2023 consumption tax reform, which was approved, introduced a VAT and a selective “sin tax” on goods and services harmful to health or the environment. The tax applies to specific goods and services and excludes exports, electricity, and telecommunications.
Reforming Brazil’s consumption tax system has long been acknowledged as a crucial policy priority, as the present fragmented system raises the costs of doing business, distorts production chains and obstructs inter-state trade. In late 2023, Brazil successfully passed and is currently implementing a major tax reform that will address the challenges related to the current complex system.
Implementing a value added tax system in a federal country that shares the authority to levy VAT among the federal and subnational governments presents challenges. This paper analyses several aspects of these challenges and describes possible solutions, based on the policy experiences of other countries. It also discusses core design features of the new dual value added tax, its management and the transition towards the new regime.
