The increase of the ICMS of Rio Grande do Sul in 2005: a computable general equilibrium analysis

Abstract

This paper uses an interregional CGE model calibrated for Rio Grande Sul to analyze the welfare and fiscal effects of a the temporary increase in ICMS tax rate implemented by the state government in 2005 to achieve fiscal balance. The simulation results were calculated for short run and long run closure. The short run results show low negative effects on the output and employment if tax policy is transitory. But long run results suggests high negative effects if such a tax policy become permanent.