Brazil study finds 56% of Social Security revenue lost to tax gaps

A study by auditors of the Brazilian Federal Revenue Service, titled “Who Finances Social Security? Evidence of Sectoral and Distributive Tax Gaps in Brazil,” estimates that 56% of the potential Social Security revenue is not collected. For every R$100 of potential revenue, only R$44 is actually received. The shortfall is driven by constitutional immunities and special regimes (including the MEI), which account for R$28, by tax evasion (R$22) and by disputes and unpaid assessments (R$6). The analysis uses 2019 data and notes that the contribution base is concentrated in formal, middle‑income employment, while informal work and special tax regimes reduce the base in lower‑ and higher‑income groups.

The authors argue that closing these gaps could help reduce the Social Security deficit. They calculate that payroll taxes amount to 28.5‑37% of wages, rising to about 77.7% when other payroll‑related taxes are included. The study also links recent labor‑market changes—platform work, outsourcing, corporate hiring, and the expansion of special regimes like MEI and Simples Nacional—to a decline in formal employment, further weakening the contribution base. The report is the first step of a broader “Tax Gap Previdenciário” project, with an official Revenue Service report forthcoming.