The impact of local economic and business dynamics on municipal service tax (ISSQN) revenue

Abstract Objective: This research investigates how local economic and business activities relate to revenues from the Brazilian Municipal Service Tax (ISSQN). Originality/relevance: Although rarely analyzed together, factors such as business density, employment levels, and the wage bill of local businesses may represent variables that directly or indirectly affect the ISSQN tax base and revenue performance. Therefore, variations in these factors can significantly impact the collection of this tax. Design/methodology/approach: The study assessed variations in ISSQN revenues and in possible correlated variables representing local economic and business dynamics between 2021 and 2022. The sample was analyzed using descriptive mapping and normality tests, along with nonparametric statistical techniques, including Spearman’s rank correlation coefficient, the Mann-Whitney U test, and the median test. Results: Statistically significant associations were identified between economic and business variables (such as the number of firms and the total wage bill) and ISSQN revenues. These findings reinforce evidence that policies promoting specific sectors of business activity stimulate the local economy and may enhance the municipality’s tax collection capacity. Contribution/implications: A clearer understanding of these relationships supports more targeted action by public managers, enabling them to identify critical points or opportunities for intervention based on objectively measurable statistical parameters.