Brazil: Changing ICMS So That the Tax Is Owed to the State of Destination Instead of the State of Origin
Brazil operates a circulation tax so that when goods and services are moved between States (ICMS), the state of origin receives a tax payment. The Brazil National Congress has issued a Constitutional Amendment (no. 87) which switches the beneficiary of the tax to the state of destination in an attempt to fund southern and southeastern states which suffer from a lack of distribution centers. The switch will see a gradual transition of the tax so that in 2015 the split will be (in percentages) 20:80, in 2016 40:60, in 2017 60:40, in 2018 80:20 so that by 2019 100% of the tax will be payable to the state of destination.
This is not the first time a switch has been attempted. In 2011 the National Council of Financial Policy (CONFAZ) set up Protocol 21 which was signed by 17 states, however the Supreme Court held that without a constitutional amendment the protocol was unlawful.