Tax exemption in Brazil in 2009: why vehicles and not the agricultural sector? An interregional general equilibrium analysis

Tax exemptions have been used systematically in Brazil to stimulate the economy. In 2009, in an attempt to contain the economic slowdown, the Brazilian government adopted a countercyclical economic policy, highlighting the tax exemption on vehicle prices. Why was this sector chosen and not another? This article seeks to analyze the effects of this policy on the Brazilian economy in 2009, comparing it with a tax exemption policy focused on the agricultural sector. Based on an interregional computable general equilibrium model (TERM-BR), the two exemption policies are simulated and compared. The results show that the reduction of taxes on agricultural products can be considered superior to that of vehicles from the point of view of its effects on employment, income, household consumption, GDP and, especially, the regional distribution of economic activity and income distribution.