Does municipality size matter? The impact of introducing the electronic consumer invoice (NFC-e)

Abstract

This study aims to analyze the NFC-e project's impact on transferring participation installment in the Tax on Circulation of Goods and Services (ICMS) from states to municipalities. The research findings suggest that the adoption of NFC-e has varying impacts on municipalities based on their size. Larger municipalities experienced more substantial increases in the transfer of participation installment in the ICMS per person. Specifically, large size municipalities witnessed an average increase of about 3.5 % per person. In terms of the effects over time, the largest municipalities exhibited an average per-person increase of approximately 18.9 % two years after the states implemented the project. The study provides evidence supporting the idea that implementing policies aimed at modernizing state tax management leads to increased revenue, marking it an important initiative.