The impact of Tax substituition on the price of pharmaceutical products in the of São Paulo

Abstract

The mechanism of the Tax Substitution has been widely adopted by the Brazilian states in order simplied the tax collection and combat evasion. Since mid-2007 the Finance Department of the State of S~ao Paulo began to adopt the tax substitution as means of receiving the ICMS due by the pharmaceutical sector. The work seeks to test the eects of change in the form of taxation on consumer prices. For this, three alternative approaches are used to test the existence of structural break in the series of prices of  pharmaceuticals in the state, and the relationship of cointegration of this series with the other states. The results suggest that, after the replacement tax, there were an increase of consumer prices.