Brazil: Losses and gains

When identifying losses caused by an action, we seek to demonstrate the losses in values ​​to facilitate the understanding and extent of the damages.

Thus, when estimating the impact of the illegal market; the size of informality and tax litigation, we extract figures that reflect the losses and, consequently, the gains if this space were occupied by legality, formality and rationality in the application of our tax system.

We have institutions that develop metrics trying to gauge the dimension of these deviations.

ETCO developed with IBRE/FGV the underground economy index carried out since 2003 and which in 2021 it reached the figure of R$ 1.3 trillion which represents 16,8% of the Brazilian GDP and with the consultancy EY sponsored an international study that found that the tax litigation, in administrative and judicial instances, reaches the astounding amount of R$ 3.4 trillion.

Concerning informality in Brazilian retail The IDV — Instituto para o Desenvolvimento do Varejo carried out a survey with the consultancy McKinsey & Company that indicates that tax evasion in physical retail is 25% to 34% and in digital retail it ranges from 33% to 37% of sales (which has continuous growth in the offer of illegal products and without invoice), with values ​​between R$ 95 and R$ 125 billion.

The National Forum Against Piracy and Illegality collects data from 15 productive sectors (clothing; fuel; personal hygiene, perfumery and cosmetics; alcoholic beverages; pesticides; pay TV; cigarettes; sporting goods; eyewear; PCs; software; cell phones; audiovisual; imported perfumes and toys) since 2014 and the survey for the year 2021 shows that these sectors had losses of BRL 205.8 billion, which added to BRL 94,7 billion (conservative estimate of an average of 46% of uncollected taxes) reaches the amount of R$ 300.5 billion. Compared to 2014, the illegal market (smuggling, piracy, counterfeiting and fraud) grew three times.

These figures of billions and trillions of reais related to the losses of industry, commerce and the formal economy make us wonder what would be the gain for the generation of jobs, revenue and impulse for our development and innovation. A simple example, adding the evasion of retail and industry indicated only in the IDV and FNCP surveys, it would be possible to finance 18 million family grants for more than 38 months with a monthly amount of R$ 300.

These projections are limited to numbers and what could be generated in gains for society as a whole, however these losses for society cannot be measured only in monetary values, as they have other consequences, whether for public safety, increased corruption and decreased productive investments.

Our police and IRS forces (federal, state and municipal) prove that criminal organizations are financed with these withheld resources, also encouraging drug and arms trafficking.

On the other hand, employment level is affected. Factories were closed and others are under threat, including the growth of persistent debtor companies that are structured to never pay taxes and, thus, erode competition. The fuel and tobacco sectors have suffered from this action, but the textile sector has also been shaken.

The various faces of illegality and the operations of persistent debtors form a criminal economic phenomenon, which has to be attacked by supply and demand. Offer, with repression, through integrated and coordinated actions of police forces and revenue.

The demand, on the other hand, is motivated by the price, which is lower in the illegal one thanks to evasion and must be faced with changes in the tax system. An example of what can be done is the recent simplification of the ICMS charge on fuels, defining the single-phase and single rate for all states, which should reduce the space for evaders.

In fact, we cannot underestimate the effects of the illegal market and the consequent tax evasion. The magnitude of the losses and what could be turned into gains for the whole society demonstrate that illegality must be permanently on the agenda of the productive sectors and the public power, which must act in cooperation in the fight against those who despise the law. . Os damages cannot be ignored, as they harm all Brazilians who bear their obligations and our expectations for the future.

Datafolha shows what the Brazilian thinks about smuggling

The Brazilian knows that smuggling causes enormous damage to the nation, attracts consumers because it does not pay the country's high taxes, markets low quality products, encourages organized crime and benefits from the inefficiency with which it is fought by the government. These were the main conclusions of an unprecedented survey by Datafolha, commissioned by ETCO-Brazilian Institute of Ethics in Competition with support from the Movement in Defense of the Brazilian Legal Market, released on May 25.

"The survey revealed that Brazilians understand the seriousness of the problem," said Evandro Guimarães, president of ETCO. "It also showed that the population supports a more rigorous fight against smuggling."

The study had wide-ranging repercussions in the media. On the day it was released, for example, it was the subject of a report and commentary on the TV show Bom Dia Brasil, and an interview on CBN radio in São Paulo.

Datafolha heard 2.401 people over the age of 16 between April 22 and 24, across the country. The study has a margin of error of 2 percentage points to more or less. Check out the main numbers.



92% If the legal product were cheaper, the Brazilian would not buy the contraband.

89% The contraband product costs less because it does not pay taxes.


77% Smuggling harms the country and the population

80% Harm to domestic trade and industry.

77% Smuggled products are made from the worst quality materials.


86% Smuggling encourages organized crime and drug trafficking.

83% It is a crime to sell contraband.

74% It is a crime to buy contraband.


48% The federal government is primarily responsible for the entry of contraband into the country.

90% The government is little or not efficient in combating smuggling.


61% The solution is to strengthen policing at borders and penalties for smugglers.

Listen to the interview given to Radio CBN / SP (25/05/2015)

Smuggling and organized crime

Datafolha research, commissioned by the Brazilian Institute of Ethics in Competition (ETCO), shows that 75% of Brazilians believe that the reduction of taxes on national cigarettes would contribute to the fight against organized crime.

Cigarette smuggling, mainly from Paraguay, is the one who supplies the cash and funds the activities of criminal factions, such as drug and arms trafficking.

See the research report:



Brazilians want tougher president to fight smuggling

In March, ETCO sponsored a new survey by Datafolha on the perception of Brazilians in relation to smuggling. Some results confirmed what was already known: the population knows that smuggling finances organized crime, places harmful products on the market and steals taxes from areas such as health, education and public security.

A novelty was the revelation that, in this year's elections, voters must charge candidates with proposals to tackle the problem - and want tougher measures than those that have been adopted so far.

The survey showed that Brazilians consider that the country has been showing a weak response to the advance of the illegal market. For 79% of respondents, for example, the government comes to connive with organized crime in relation to the smuggled cigarette trade.

Election theme

In this context, questions about what they expect from politicians running for election this year have gained prominence. No less than 86% of respondents said they would not vote for a candidate for president without determination to face the problem. Most also expect the next government and Congress to approve and adopt more vigorous measures, including more investments in border control, tougher laws and the closure of commercial establishments that sell illegal products.

The opinion also drew attention to how Brazil should treat Paraguay, the main source of products smuggled here. No less than 62% of those surveyed approved an extreme measure: closing the border between the two countries.

According to ETCO's executive president, Edson Vismona, the study showed the importance that the topic has been gaining. "At the moment when several states are going through security crises, it became clear in the research that the Brazilian wants the government to act more forcefully and will demand a firm position on the issue during the elections," he said.

The survey was carried out in 129 municipalities between the 5th and 8th of February. Datafolha heard 2.081 people over 16 years old. The margin of error is 2 percentage points.

Damages caused

Brazil lost R $ 146,3 billion in 2017 to piracy. The value is estimated by the National Forum Against Piracy and Illegality (FNCP), which coordinates together with ETCO the Movement in Defense of the Brazilian Legal Market.

The value is the estimate of the losses of companies and the government with tax evasion of pirated and smuggled products.

In 2017, companies stopped billing R $ 100,2 billion. The most affected sector was clothing (R $ 35,6 billion), followed by cigarettes (R $ 12,3 billion), glasses (R $ 7,7 billion) and pay TV (R $ 4,8 billion) bi). The amount represents the lost market for pirated products. These illegal products fail to pay an average tax rate of 46%.