The effects of tax policy and economic regulation on the companies of the electricity sector in Brazil

Abstract

The objective of this study was to analyze the possible effects of the electric sector's regulatory regulations and the enactment of laws 10,637 / 2002 and 10,833 / 2003 on the collection of federal PIS and COFINS taxes and on pricing of electric energy tariffs, identifying the determinant factors for fixing them. The multivariate analysis was used as an analytical approach, taking as reference the multiple panel regressions. In general, there was a 113% increase in the payment of PIS and COFINS social contributions after the enactment of Law 10.833/2003, indicating that the right to deduct credits on certain factors of production was not obtained by companies in the electric energy sector increasing, therefore, the tax burden of companies. The direct consequence of this result was the increase in the average electric energy tariff charged from residential consumers, especially after the 2004 period. In this sense, after a 153% increase in the PIS and COFINS rates, and after the concessionaires' right to revise their tariffs when there was an increase in costs, including taxes, there was a considerable increase in the average tariff of electric power in the order of 2.8% and 8.1%, respectively, higher than the increases in their production costs. Therefore, it can be inferred that the increase in electric energy tariffs during the study period was mainly due to the increase of the tax burden and the regulatory factors since the factors of production were not significant in the model.