Despite being the fifth largest country in the world and having one of the most productive agricultural sectors, Brazil collects less money in tax on rural land than a borough in the city of São Paulo collects in Municipal Property Tax, also known in Brazil as IPTU. Throughout 2022, all the rural land in Brazil paid 2,7 billion reais of ITR (Rural Land Tax), while Pinheiros borough, which includes the neighborhoods of Alto de Pinheiros, Pinheiros, Jardim Paulista and Itaim Bibi, collected 2,8 billion reais in IPTU during the same period.
These figures were released by Brazil’s Revenue Service and help to understand how taxation of rural land in Brazil is low even with the rise in agricultural production. Besides, this scenario also affects a fairer land distribution in the country based on objective productivity criteria, which is precisely one of ITR’s goals. The tax was created so that the highest aliquot falls on the least productive lands to discourage the maintenance of unproductive properties solely for financial speculation, thus increasing the land supply. The logic of this tax (charging more from the less productive ones) follows that of the United Kingdom and its land and value tax, established in the 18th century, which contributed to agrarian reform in the UK.
Considering the historical series of Brazil’s Revenue Service tax collections since 1995, ITR has never represented more than 0.3% of total collections in the country. Currently, ITR collection corresponds to 0.13% of the amount collected by the Revenue Service. By way of comparison, the Social Contribution to Net Profit (CSLL, in Portuguese) charged to companies represents 7.9% of the Revenue Service's total collection.
The government changed taxation due to the Eldorado dos Carajás massacre
Established for the first time in 1891, the 1988 Constitution adopted ITR as a federal tax whose money is divided 50-50 with the cities and towns. One of the most relevant changes in ITR occurred after the Eldorado dos Carajás massacre, in 1996, when the Military Police killed 21 small farmers who were demanding the expropriation of a farm in Pará state where 3,500 landless families were encamping. During that year, the federal government sanctioned a law expanding the limit of ITR from 4.5% to 20%, which is in place to this day. As a result, the tax, which has a progressive scale, currently has rates ranging from 0.03% to 20%.
Besides, a 2003 Constitutional Amendment made it possible for cities and towns to receive all ITR amounts from their territories as long as they enter into an agreement with the Revenue Service and are responsible for all inspection and collection of ITR. According to the Revenue Service, 24% of all Brazilian municipalities signed agreements in 2022 with the agency to receive and charge ITR. The Center-West is the region with the most cities in this situation: 356 municipalities have signed agreements with the Revenue Service to assume all tax collection and inspection.
In a meeting with the government, the Landless Workers’ Movement demanded an update on ITR taxation
The ITR is calculated taking into account the so-called bare land value, which is the market price of the land disregarding any buildings, plantations or pastures on the site (the so-called “Land Use Degree”), an indicator that measures the productivity of the land and the taxable area, which considers the total area of the property minus areas considered protected and covered with native vegetation. Low revenue occurs precisely due to poor monitoring of land productivity and the fact that this productivity is self-declaratory, that is, the taxpayers themselves declare what they produce, and the Revenue Service charges based on that.
Representatives of social movements from rural areas and experts who work in assessing land productivity point out that one of the most common ways for landowners to circumvent the ITR charge to pay less is by declaring "productive land" properties that often have no production, or else have a much lower production than that declared. Furthermore, the rates used to measure the agricultural productivity of the land date back to 1975 and have never been updated. According to the Institute of Applied Economic Research (IPEA, in Portuguese), from 1975 to 2020, the productivity of the Brazilian agricultural sector grew by 400%. Add to this the fact that the National Institute of Colonization and Agrarian Reform (Incra, in Portuguese) has a deficit of around 3,000 employees and has not held a public service exam since 2010. The municipality is responsible for measuring land productivity in the country, but it simply does not share information with the Revenue Service, which collects the ITR.
The Landless Workers' Movement presented to the ministers of Planning, Chief of Staff, Agrarian Development and General Secretariat of the Presidency the need to update the indicators and make the collection of ITR more effective. The meetings were held between Monday (16) and Wednesday (18) in Brasília. During the meetings, the government signaled it would include the Movement's agenda in the budget. However, as Brasil de Fato showed, the budget foreseen for agrarian reform next year is the smallest of all the Workers’ Party administrations so far and represents one-fifth of what the MST claims is necessary to settle the 65,000 families currently living in precarious encampments.
Edited by: Rodrigo Chagas e Nadini Lopes
