Principal investigator: Viviane Pires Ribeiro
Article title: Spatial Analysis of the Ecological ICMS and its Relationship with the Socioeconomic Development of Municipalities in Minas Gerais
Article authors: Larissa de Albuquerque Sgarbi, Rosiane Maria Lima Gonçalves, Luiz Antônio Abrantes and Antônio Carlos Brunozi Júnior
Location of the intervention: Minas Gerais – Brazil
Sample size: 853 municipalities in Minas Gerais
Sector: Economic Policy and Governance
Type of Intervention: Effects of the Ecological ICMS on IMRS and GDP per capita
Primary variable of interest: Ecological ICMS
Evaluation method: Other – Exploratory analysis of spatial data
Evaluation Context
The Ecological ICMS (ICMS-E) was implemented in the state of Minas Gerais in 1995, due to demands from municipalities that considered themselves at a comparative disadvantage because of the large protected areas they possessed within their territory. Thus, the ICMS-E is an innovation in relation to the method used in the distribution of revenues collected from the Tax on Operations related to the Circulation of Goods and on the Provision of Interstate and Intermunicipal Transportation and Communication Services (ICMS), as an additional resource for municipalities that meet the sub-criterion of conservation units, aiming to reduce economic and social differences between municipalities, as well as encouraging the application of resources to the environment.
Intervention Details
In de Albuquerque Sgarbi et al. (2018), the authors analyze the spatial distribution of ICMS-E financial transfers and their implications for the Minas Gerais Social Responsibility Index (IMRS) and the Gross Domestic Product (GDP) per capita. The research was conducted with 853 municipalities in Minas Gerais, which were grouped according to the ten administrative regions of the State, namely: Alto Paranaíba (31 municipalities); Central (158 municipalities); Centro-Oeste de Minas (56 municipalities); Jequitinhonha/Mucuri (66 municipalities); Zona da Mata (142 municipalities); Noroeste de Minas (19 municipalities); Norte de Minas (89 municipalities); Rio Doce (102 municipalities); Sul de Minas (155 municipalities) and Triângulo Mineiro (35 municipalities).
The information collected by the authors is biennial, covering the period from 2004 to 2012. The data comes from various sources, namely: i) for ICMS-E information, data from the João Pinheiro Foundation (FJP), the Minas Gerais State Finance Secretariat (SEF/MG), and the Minas Gerais State Secretariat for the Environment and Sustainable Development (SEMAD) were used; ii) for data on municipal GDP, the databases of SEF/MG, the Brazilian Institute of Geography and Statistics (IBGE), the National Accounts Coordination (Conac), and the Center for Statistics and Information (CEI) of the FJP were used; and iii) for data on IMRS, the data was collected from the João Pinheiro Foundation (FJP), the entity responsible for its publication.
Methodology Details
Exploratory spatial data analysis (ESDA) was used to group municipalities by their ICMS-E (State VAT) revenue potential, to identify the relationship between per capita Gross Domestic Product and ICMS-E, and to identify the relationship between IMRS (Municipal Social Security Index) and ICMS-E.
The tests applied in the research for AEDE are: Spatial Weighting Matrix, Box Map/Global Statistics of the univariate Moran's I, Univariate Moran's I Scatter Plot, Global Statistics of the bivariate Moran's I, Bivariate Moran's I Scatter Plot, and Local Statistics of the bivariate Moran's I. The software used was GeoDaSpace.
Results
The analyses carried out by de Albuquerque Sgarbi et al. (2018) indicate that ICMS-E revenue shows a positive spatial relationship, that is, municipalities that exhibit high ICMS-E revenue tend to be surrounded by neighbors in the same situation. Municipalities with below-average revenue tend to be surrounded by municipalities with similar situations. This highlights an analogous behavior among neighboring municipalities regarding compliance with the ICMS-E sub-criteria. Regarding ICMS-E revenue, it was not uniformly distributed across the years analyzed, and its annual distribution pattern was not homogeneous among the municipalities of Minas Gerais. Some regions showed above-average revenue, while others showed below-average revenue.
The relationship between ICMS-E (Tax on Circulation of Goods and Services - Electronic) and IMRS (Municipal Social Responsibility Index) became more significant over time, showing that municipalities with higher social indicators were surrounded by municipal units with above-average ICMS revenues. These results indicate that efforts to improve the quality of life of the population in these municipalities, as measured by the IMRS, have also become associated with addressing issues related to environmental preservation. However, the authors found an increase in the number of municipalities with low IMRS and small amounts of ICMS-E transfers. These increases in low-low standards represent the presence of areas that did not experience the positive effects of tax redistribution.
The special associations between ICMS-E (State VAT) and GDP per capita show a positive, albeit weak, spatial relationship only in the years 2006, 2010, and 2012. However, this spatial autocorrelation of the variables decreased from 2006 to 2012. This scenario reflects the changes in the criteria for ICMS transfers to municipalities in Minas Gerais, emphasizing their redistributive aspects, even though the existence of the low correlation may indicate that the proportion of wealthier municipalities receives the largest shares of the tax.
Lessons in Public Policy
Did the transfer of the Ecological ICMS (Tax on Circulation of Goods and Services) lead to changes in the socioeconomic development indicators of municipalities in Minas Gerais? Given that national and state environmental protection policies depend on the engagement of municipal managers, de Albuquerque Sgarbi et al. (2018) found that fiscal transfers, via ICMS-E, involved a larger group of municipalities between 2004 and 2012, demonstrating its incentive role and the spillover effect, that is, the decisions of neighboring public administrations are made in an interdependent manner. Furthermore, the need for municipal action to receive the ICMS-E is highlighted, a measure that can benefit the local population and generate positive externalities, since the results of environmental preservation are not limited to the local dimension. However, to encompass a greater number of municipalities, the authors suggest that the government should constantly analyze and adapt the ICMS distribution criteria, given that there is evidence that the power of the largest municipalities prevails in the collection of ICMS and their specific characteristics.
Reference: de Albuquerque Sgarbi, L., Gonçalves, RML, Abrantes, LA, & Júnior, ACB (2018). SPATIAL ANALYSIS OF THE ECOLOGICAL ICMS AND ITS RELATIONS WITH THE SOCIOECONOMIC DEVELOPMENT OF MUNICIPALITIES IN MINAS GERAIS. Reuna Magazine, 23 (4), 15-41.
