Many governments offer incentives or benefits for businesses – some form of subsidy or exemption – in the expectation of corresponding social or economic returns. Yet we know little about the impact of these controversial and often hidden ‘tax expenditures’. This study contributes to filling this gap by analyzing a Brazilian government ‘fiscal recuperation’ policy (referred to as ‘Refis’), which is justified on the basis of boosting employment. In the backdrop of high unemployment, the Brazilian federal government has offered nearly 40 Refis to defer and forgive tax debt since the year 2000. The first part of this article analyzes the Refis as a public policy through the prism of the policy cycle. The second part gauges the effects of the Refis on job creation or maintenance. Using a dataset of approximately 10,000 businesses, we match and then compare similar businesses that did and did not subscribe to a 2014 Refis program. Our results reveal a policy lacking adequate transparency and due process, which exerted a strong negative impact on employment. On average, businesses that participated in the 2014 Refis lost 6% more jobs than non-participants. These results echo much of the literature in enjoining governments to reevaluate the use of tax debt relief.

Keywords: employment, tax expenditures, Brazil, tax debt relief, transparency.

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Does Tax Debt Relief Stimulate Employment? A Policy Analysis of Brazil’s "Refis" Programs

Working paper. 2023. Gregory Michener, Natalia Ferreira Rodrigues e Diego de Faveri Pereira Lima