Custo Brasil: tax system is the second axis that most generates expenses for companies
The Brazil Cost was recently updated. It went from R$ 1.5 trillion to R$ 1.7 trillion. In practice, R$ 1.00 of every R$ 5.00 that Brazilian companies spend more to produce in the country is due to the tax system.
According to the survey, the complexity of calculating, declaring and paying taxes and the high tax burden contribute to the additional costs. Economist Roberto Dardis explains that the system is difficult to understand, mainly due to the differences that exist in tax collection by each entity of the federation.
“We have a serious problem: each state has its own independent charge. If you are going to open a company today, in São Paulo it is a cost, if you are going to open in another state, it is another. With that, it really becomes more expensive and ends up becoming a fight between the states for which state will charge a lower tax for that company, precisely to attract.”
The autonomy for defining the rates of the Tax on the Circulation of Goods and Services (ICMS) by each state and the respective legislation is part of the so-called “tax madhouse”, which makes life difficult for entrepreneurs and, in the end, increases the price of products and services that reach consumers.
“Within a company, there are a battalion of professionals just to do this type of thing. It is a lot of work for a company to do a service that should be practical. Unfortunately it is not. It is costly for it. The cost also increases due to this and everything will be left over at the end point, which is the product that will be more expensive. This should have been corrected a long time ago.”
Simplification
Reforming the Brazilian tax system is a consensus among public authorities, the productive sector and specialists. The theme has been discussed in the National Congress for about three decades, but the lack of agreement on the changes ended up burying all the proposals over the years.
In the National Congress, two constitutional amendment proposals (PEC) that propose a tax reform on consumption are more advanced. A PEC 45/2019of the Chamber of Deputies, and the PEC 110/2019, from the Senate. Although they present some differences, both texts suggest the unification of taxes collected by the Union, such as IPI, PIS-PASEP and Cofins; by the states, the ICMS; and for the municipalities, the ISS.
From these five taxes, a single tax would arise, along the lines of the Value Added Tax (VAT) charged in most European countries. Whether it will be a VAT that is only shared between the Union, states and municipalities – as suggested by PEC 45 – or a Dual VAT – with part from the Union and another from states and municipalities – is not yet known, but the mere simplification of the tax system would already be a victory, says Dardis. “Unification throughout Brazil is essential, an easier and more practical tribute, which is not the case today.”
Lawyer Arnaldo Sampaio, professor of General Theory of the State at the Law School of the University of São Paulo (USP), believes that any of the texts would be able to resolve the complexity of the current model. But he goes further: even without the prediction of a decrease in the tax burden, the specialist believes that the simplification of the system will reduce costs for companies.
“There are several studies that point out that this tax reform would result in the heating up of the economic model and an expansion of our Gross Domestic Product. So, I have the impression that the tax reform naturally tends to reduce the tax burden, freeing up resources for the sector production that would result and benefit Brazil as a whole.”
Next steps
In the Chamber of Deputies, the working group created to debate the tax reform promised to release its report in early June, through federal deputy Aguinaldo Ribeiro (PP-PB). The Lula government is working with the idea of approving the text of the reform before the parliamentary recess so that, in the second half of the year, it can take the discussion to the Senate.
main cost
According to the study by the Movimento Brasil Competitivo with the MDIC, the axis that most impacts is the low qualification of Brazilian labor, which represents 8% of the Brazil Cost.
Cost of Brazil is R$ 1.7 trillion higher than the average of OECD countries, according to a study
By Brasil 61
