The government of São Paulo, led by Tarcísio de Freitas, is progressing in its initiative to abolish the tax substitution regime, a taxation method where taxes are collected at the beginning of the production chain based on estimated final consumer prices. This decision is part of a broader reform aimed at simplifying the tax system and fostering economic growth. Secretary of Finance and Planning, Samuel Kinoshita, emphasized that the end of this regime was a pivotal goal outlined during their campaign.

Kinoshita expressed that the tax substitution regime has complicated financial processes for producers, discouraging productivity and economic initiative, which, in turn, can hinder job creation. He noted that the existing framework was no longer compatible with the new tax reform measures being implemented and suggested that the regime had been overused, resulting in more issues than benefits. This change is anticipated to create a more favorable business environment in São Paulo.

The phased approach to dismantling this regime is seen as a calculated move to ensure that the transition does not disrupt the economy. By alleviating the burden on producers and aligning tax practices with modern regulations, the São Paulo government aims to stimulate economic activities and restore confidence among business leaders and investors. This initiative represents a significant shift in Brazil's approach to taxation and could have broader implications for the country's economic landscape as similar changes are considered in other states.