Abstract for:Dynamics of Taxation on Fuels

This paper aims to analyze the dynamics of the tax over the circulation of goods and services (ICMS) on fuels in Federal District, Brazil and estimate its potential tax capacity, defined as the maximum capacity of tax collecting in an established legal frame. As ICMS in Brazil is the main source of public resources of tax origin for Brazilian states, this analysis is very useful to state tax authorities because fuels constitute the economic segment that most collects ICMS. First, the logistical flows of production, distribution and commercialization of fuels are mapped in parallel with ICMS tax incidence. Then, qualitative SD models are idealized to explain the behavior over time of both sales and ICMS tax curves of each type of fuel. Finally, a quantitative SD model is built to estimate the potential ICMS tax capacity on fuels, as well as the tax gap and tax effort index, which are calculated from the effective and potential ICMS revenues. SD proved to be a valuable tool for tax revenue performance analysis in improving the understanding of the Brazilian taxation dynamics on fuels and showing trends in tax gap and tax effort index, which helps to guide monitoring efforts.