Source: The State of S. Paulo (São Paulo - SP) - 27/05/2012

A few days ago, President Dilma Rousseff promised to make the tax reform with a new model of action: instead of announcing, it will execute; instead of a global proposal, one-off measures. In Lula's administration, the government spent years negotiating with governors and parliamentarians, cutting back and forth, accepting to deface and diminish the initial proposal until it was reduced to the unification of the ICMS only. Still, he gave up sending the proposal to Congress, because it would be rejected on the spot. Dilma got tired and will follow another path. He gave the electricity tariff as an example, which he promised to exempt from taxes. He announced, but so far has not executed. 

His finance minister seems to have understood the message this way: tax reform needs to be punctual, pragmatic and flexible - it exempts the tax today and raises the rate tomorrow, according to the current situation. And the tax structure remains intact, unchanged. If the automakers' yard is full of automobiles, the tax is cut, the industry sells, spills inventories and three months later it returns to what it was before. If there are other industrial sectors stocked and with production falling, get businessmen and workers with political pressure in Brasília. As is the auto industry.

Tax reform can and should be sliced, as the president wants. It did not advance in the FHC and Lula governments because it followed a wrong ritual, of trying to negotiate the whole, giving rise to political bargains with one and the other tax that rendered it harmless at the end of the negotiation. But it is absolutely essential that it be considered as a whole, reducing not only the tax burden, but also the amount of taxes, seeking simplification, facilitating collection and collection and making tax evasion difficult.

It is not possible to reform while maintaining the same tax structure, without correcting a system that has become a monster precisely because momentary blows have overcome fiscal rationality since the days of the military dictatorship. To put it more clearly, in the last 40 years a tax was created whenever the federal budget opened a new hole, generated by successive governments that spent more than they could. That was how the federal PIS-Cofins were born, the nine taxes included in the electricity bills, the municipal fire tax and so on. And the taxpayer continues to pay to support increasingly expensive governments. And the industry continues to lose, more and more, competition power.

The pragmatic style of the Dilma government is welcome at the right time and in the right situations. The problem is that the economic team mixes garlic with strips and confuses tax reform with temporary exemptions. Instead of perfecting regulation to encourage private investment in infrastructure, it fills the BNDES 'cash with subsidized money to finance consumption-oriented production. The immediacy hides the real problem.

Dilma needs to be advised by people who think further, who see the country's structural dilemmas, the bottlenecks that hinder growth, stifle productivity and weaken the industry's competitiveness. This will not be solved with episodic relief and addressed to only one industrial sector. This momentary breath does not resolve and still leaves the rest of the industry suffering from the usual ills.

With the new package, there was a discussion about whether the growth model via consumption is exhausted or not, whether or not to recover growth between 3% and 4% this year. The debate is out of focus, not least because the real objective of the package was to empty the yards of the automakers and avoid layoffs of workers. It is far from being able to reverse the economic downturn. But that is the agenda that the government offers.

In a dropper of false medicines to resume growth, the Dilma government abandons the effective and true path: touching on reforms, investing in infrastructure and education for workers, reducing the cost of producing in Brazil, raising savings and investment rates . And, above all, the government saves money, rationalizes its spending and expands its investments.

Suely Caldas, journalist; is a professor at PUC-Rio