Why tax reform is a top priority for the industry
Like other productive sectors, industry has the complexity of the tax system as one of the biggest obstacles to being competitive. In the current model, the Union, the states, the Federal District and the municipalities can create laws for the collection of taxes on the commercialization of products and provision of services.
The federal government, for example, has the Tax on Industrialized Products (IPI). The states and the DF have the Tax on Circulation of Goods and Provision of Services, the ICMS, while the city halls charge the Tax on Services (ISS). The problem is that taxation is not limited to these three taxes. There are others, such as PIS and Cofins.
In addition, the freedom for each entity to legislate on the taxes that are within its competence generates a veritable “tax madhouse”. According to the Liberal Institute, around 420,000 tax rules have been created since 1988.
To pay so much tax, each subject to its own collection rules, Brazilian companies spend, on average, 1,501 hours per year. Companies from no other country in the world take as long to catch up with the tax system as it does here, according to the World Bank. In practice, there are more than 62 days – the equivalent of two months – uninterrupted just to calculate and pay taxes.
Arnaldo Sampaio, lawyer and professor of general theory of the State at the Faculty of Law of the University of São Paulo (USP), explains that the complex tax system makes the Brazilian industry less competitive, since competitors in the international market do not waste time and money that national companies lose to account for so many rules.
“This complexity results in a cost for everyone who pays the tax. How many hours and how much resources does a company need to calculate all its tax obligations? We know that expecting someone to know all the nuances of taxation is an inglorious expectation , because there are many rules”, he says.
According to the National Confederation of Industry (CNI), consumption by Brazilians has grown over the last 15 years, but has not been accompanied by the development of national industry. Those who took care of all the demand were the outside industries. One of the reasons for this is the tax system, which ends up making products produced here more expensive than those imported.
As if the comparative disadvantages in the external market were not enough, internally the industry is more harmed by the current tax system than other sectors. The tax burden on the manufacturing industry is 46.2%, against 22.1% on services.
“This seesaw ends up causing damage to the country’s development environment and the industry is presenting itself, with the Legislative Agenda, so that we can discuss and find the best text”, says Senator Eduardo Gomes (PL-TO).
favorable environment
Discussed for decades, tax reform never got off the ground. Differences between the productive sectors and also between the entities of the federation over the text ended up preventing the National Congress from voting on a proposal that had the consensus of all interested parties.
Now, the theme has returned to the congressmen’s agenda. There is even a working group in the Chamber of Deputies with the objective of debating the proposals that are on the table, modeling a text and putting it to vote in the House until the end of May. The federal government says it will work to approve the tax reform by October.
Deputy Joaquim Passarinho (PL-PA) says that the environment for discussing and voting on the reform is favorable. “The opposition is in favor of reform. Before, there were governments wanting to reform and the opposition making it difficult. Today, the opposition wants reform the most. So, it’s very easy for the government to work. If the whole opposition wants it, it’s enough for them want,” he says.
Coordinator of the tax reform group wants proposal approved by October
By Brasil 61
