Source: Intelog - Porto Alegre / RS - EDITORIAL - 31/03/2010

The Minister of Finance announced, as if it were a great progress, that the tax burden in 2009 fell to 33,8%, from 34,5% in the previous year. It is known that the decline reflected only the effects of the crisis, since the tax cuts adopted to face it were relatively modest - basically, that of the IPI for some products supplied by sectors that use a lot of labor and that, thus, contributed to keep domestic demand high.

Although modest, we must note that the measure had a more than proportional effect on demand, as shown by the sales statistics of the sectors benefited. Even today, when the IPI reduction period on automobiles is ending, there is an extraordinary sales volume that should set a historical record in this market.

It would be up to the authorities to learn a lesson from this fact and to be bold enough to reduce consumption taxes for all products, a measure whose effect on demand would be healthier than that resulting from long-term financing.

These are contributing, on the one hand, to increase the spot price, creating artificial inflation, and, on the other, so that consumers do not make personal savings, which, in the end, would increase their purchasing power.

A tax reform that had been proposed with great timidity by the PT government, which never endeavored to make it a reality, should go far beyond the simple reduction of the IPI and become an instrument of economic policy aimed at efficiency and also on the social side, as an instrument for a better income distribution.

Such a reform would have the advantage of reducing the price of exported products, offsetting the exchange rate appreciation that largely reflects the improvement of our economy, and would reduce imports that, in most cases, do not include the tax burden of supplier countries.

And the fiscal war that is taking place today between states cannot be admitted, falsifying economic imperatives that should dictate the location of investments.

But the lack of rationality in federal decisions is always present. The Minister of Finance, at the time the government was announcing PAC 2, which will require significant support from the private sector, warned that interest rates for equipment purchases would be raised by one percentage point. On the same day, Governor José Serra reduced the ICMS for the textile sector.