Publication: VAT Cashback Programs in Practice: The Case of Devolve-ICMS in Rio Grande do Sul, Brazil
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2025-08-28
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2025-09-02
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This note describes the Devolve-ICMS program, an innovative VAT cashback initiative aimed at refunding taxes to low-income households in the state of Rio Grande do Sul, Brazil. Using administrative records, the authors document several stylized facts about the workings of the program. First, even the poorest households sometimes consume in formal stores. Second, as a share of reported income, lower income families consume relatively more on average. Third, 60 percent of households only receive a flat cash transfer, unrelated to their formal consumption–this highlights the trade-offs in generosity vs. incentivizing formal consumption. Finally, formal consumption is substantially higher for female headed households and for participants in a concurrent lottery program that also incentivizes formal consumption.
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“Bachas, Pierre; Flores, Tatiana; Lara Ibarra, Gabriel; Mantovani, Anderson Aparecido; Oliveira, Evandro Souza de; Padilha, Giovanni; Scot, Thiago. 2025. VAT Cashback Programs in Practice: The Case of Devolve-ICMS in Rio Grande do Sul, Brazil. Prosperity Insight Series. © World Bank. http://hdl.handle.net/10986/43648 License: CC BY-NC 3.0 IGO.”
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