Towards a truthful land taxation mechanism in Brazil

Abstract

This paper shows that the asymmetric information present in the relationship between the government and agricultural producers has led to persistent problems in the application of land taxes (Imposto Territorial Rural - ITR) in Brazil. The main result is that, when the asymmetric information is taken into account, some use of output taxes in the optimal tax scheme may be more desirable than a pure land tax regime. Herein, we consider a model of optimal taxation in which the government maximizes the expected tax revenue less the farmer's yields from a non-agricultural activity. There is a continuum of farmers usin g land to produce a homogeneous agricultural output and for non-productive ends. They have private information on the parameters of both activities. Also, there is no land rental market, and the harvested area cannot exceed the farm size. We show that a pure land tax regime is optimal only if there is complete information or there is no idle land in equilibrium. A composite tax mechanism, which simultaneously considers taxes on land and output, can be used to implement the optimal scheme in the case of incomplete information. Nowadays, the ITR rate is a function of the degree of use, which is not observed by the government, and farm size. Our study implies that ITR rate should depend on farm size and the rCMS (Value-added tax on sales and services) per hectare, which is a reliable proxy for land use.

o objetivo do artigo e mostrar que a assimetria de informagao presente na relagao entre governo e produtores agropecmirios pode constituir a origem dos problemas que ainda persistem na aplicagao do Imposto Territorial no Brasil. Atraves da construgao de urn modelo teorico simples, que se baseia no problema de taxagao otima sob informagao assimetrica, e possivel analisar limitagoes inerentes a aplicagao do Imposto Territorial Rural que ainda nao se incorporaram a analise da taxagao de terras. Diante de uma situagao onde ha terra ociosa, como ocorre no Brasil, 0 modele mostra que 0 usa do ITR como unico instrumento tributario nao e capaz de implementar 0 esquema otimo. A solugao apontada pelo modelo envolve a utilizagao de urn esquema misto que consider a 0 Imposto sobre a Circulagao de Mercadorias e Servigos (ICMS) e 0 ITR. Atualmente, a aHquota do ITR e uma fungao do grau de utilizagao e do tamanho do estabelecimento agricola. Como conseqiiencia da analise, sugerimos que a aHquota do ITR dependa do tamanho do estabelecimento e do ICMS por hectare, que constitui uma medida aproximada e observavel do grau de utilizagao das terras.