Does Ecological ICMS have an impact on the socioeconomic development of municipalities in Minas Gerais?

Responsible researcher: Viviane Pires Ribeiro

Article title: SPATIAL ANALYSIS OF ECOLOGICAL ICMS AND ITS RELATIONS WITH THE SOCIO-ECONOMIC DEVELOPMENT OF MINEIROS MUNICIPALITIES

Authors of the article: Larissa de Albuquerque Sgarbi, Rosiane Maria Lima Gonçalves, Luiz Antônio Abrantes and Antônio Carlos Brunozi Júnior

Location of intervention: Minas Gerais - Brazil

Sample size: 853 municipalities in Minas Gerais

Sector: Economic Policy and Governance

Type of Intervention: Effects of ICMS-Ecológico on IMRS and GDP per capita

Variable of main interest: Ecological ICMS

Assessment method: Other - Exploratory analysis of spatial data



Assessment 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, due to the large protected areas that they had in their territorial extension. Thus, 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 Provisions of Interstate and Intermunicipal Transport and Communication Services (ICMS), as an additional resource for municipalities that meet the conservation unit sub-criterion, aiming to reduce economic and social differences between municipalities, in addition to 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, as follows: Alto Paranaíba (31 municipalities); Central (158 municipalities); Central-West of Minas (56 municipalities); Jequitinhonha/Mucuri (66 municipalities); Zona da Mata (142 municipalities); Northwest of Minas (19 municipalities); North of 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 is from different bases, being: i) for the ICMS-E information, data from the João Pinheiro Foundation (FJP), from the Secretariat of the State of Finance of Minas Gerais (SEF/MG) and the State Secretariat for the Environment and Sustainable Development of Minas Gerais (SEMAD); ii) for data relating to the municipalities' GDP, the database of SEF/MG, Brazilian Institute of Geography and Statistics (IBGE), Coordination of National Accounts (Conac) and Statistics and Information Center (CEI) of the FJP, and iii) for data relating to IMRS, it was collected from Fundação João Pinheiro (FJP), the entity responsible for its publication.

Methodology Details

Exploratory spatial data analysis (AEDE) was used to group municipalities by ICMS-E collection potential, identify the relationship between Gross Domestic Product per capita and ICMS-E and identify the relationship between IMRS and ICMS- AND.

The tests applied in the research for AEDE are: Spatial Weights Matrix, Box Map/global statistics of the univariate Moran Indicator, univariate Moran Scatter Diagram, global statistics of the bivariate Moran Indicator, bivariate Moran Scatter Diagram and local Statistics of the bivariate Moran Indicator. The software used was GeoDaSpace.

Results

The analyzes carried out by de Albuquerque Sgarbi et al. (2018) indicate that ICMS-E collection has a positive spatial relationship, that is, municipalities that exhibit high ICMS-E collection values ​​tend to be surrounded by neighbors in the same situation. Municipalities with below-average revenue tend to be surrounded by municipalities with similar situations. Thus, demonstrating similar behavior between neighboring municipalities in terms of compliance with the ICMS-E sub-criteria. With regard to ICMS-E collection, it was not evenly distributed between the years analyzed and its annual distribution pattern was not homogeneous among the municipalities of Minas Gerais. Observing regions with collections above the average and others below.

The relationship between ICMS-E and IMRS became more significant over the periods, showing that municipalities with higher social indicators were surrounded by municipal units with above-average ICMS collections. These results indicate that efforts to improve the quality of life of the population of these municipalities, measured by IMRS, have also become associated with addressing issues linked to environmental preservation. However, the authors found an increase in the number of municipalities with low IMRS and small amounts of transfer via ICMS-E. These increases in low-low standards represent the presence of hubs that did not present the positive effects of tax redistribution.

The special associations between ICMS-E and GDP per capita show a positive spatial relationship, not very significant, only in the years 2006, 2010 and 2012. However, this spatial autocorrelation of the variables reduced from 2006 to 2012. This scenario reflects the changes to the criteria for transfers to ICMS municipalities in Minas Gerais, emphasizing its redistributive aspects, even though the existence of low correlation may indicate that the proportion of richer municipalities receives the highest tax shares.

Public Policy Lessons

Did the transfer of the Ecological ICMS imply changes in the socioeconomic development indicators of Minas Gerais municipalities? 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, over the period 2004 and 2012, a larger set of municipalities, demonstrating their encouraging role and the spillover effect, that is, the decisions of neighboring public administrations are taken interdependently. Furthermore, the need for action by the municipality to receive ICMS-E stands out, a measure that could benefit the local population and generate positive externalities, since the results of environmental preservation are not restricted to the local dimension. However, to cover a greater number of municipalities, the authors suggest that the government must constantly analyze and adapt the ICMS distribution criteria, as there were indications that the strength of the largest municipalities prevails in ICMS collection and its specificities.

Reference : by Albuquerque Sgarbi, L., Gonçalves, RML, Abrantes, LA, & Júnior, ACB (2018). SPATIAL ANALYSIS OF ECOLOGICAL ICMS AND ITS RELATIONS WITH THE SOCIOECONOMIC DEVELOPMENT OF MINEIROS MUNICIPALITIES. Reuna Magazine , 23(4), 15-41.