The tax revolution is feasible


Source: Gazeta Mercantil, 16/08/2005

By Emerson Kapaz

August 16, 2005 - There is a better way than what has been done until today. The right balance between the value of taxes and the democratization of the tax base is the most effective way to organize the tax system, inhibiting tax evasion and, as a result, the negative impacts of illegal competition. However, Brazil, in all its history, has been going in the opposite direction, with consequences that are most harmful to development.

The first of these is the culture of evasion that affects the entire production chain and creates a powerful competitive differential for companies that act illegally, those that do not comply with their tax obligations or engage in smuggling and “piracy” practices. In addition to public coffers, those who lose out in the process are precisely the workers who, when they lose formal jobs, are deprived of better income conditions and professional growth.

At the same time, it loses the economy because, in the clash with illegal competition, one of the first victims is competitiveness. And there are still chain losses for the entire society that, without realizing it, is destroying its capacity to generate wealth, undermining its essential values.

It is for all these reasons that the Brazilian Institute of Ethics in Competition (Etco) took the initiative to carry out, in collaboration with the Getúlio Vargas Foundation, a study on the impacts of the tax burden on the various sectors of the economy, with the firm purpose of contributing to the construction of a positive agenda, in search of a new cycle of progress and sustained development. The roots of the work can be found in the entity's initial proposal, made three years ago, when it sought to focus attention on four main fronts: awareness of the ills of illegal competition, impunity due to the slowness of the Judiciary, excessive bureaucracy and high taxes.

In recent years, with more or less intensity, all impasses have been attacked, with the exception of the burning theme of taxes. In order for illegal competition to recede and the country to grow again, we must admit that, more than a tax reform, a tax revolution that modernizes and revitalizes the system is imperative today. We recognize the need to act to make such a change viable and to strengthen its rationale foundations. This study is a contribution in this regard. The novelty in it is a scenario simulator capable of showing precisely what the states and the Nation have to gain from the tax revolution. Or to lose, in the event that it does not leave the paper or is confined to palliative solutions.

In the last ten years, the tax system has been sensitive to the increase in different taxes, which went from 24% to over 36% of GDP.

In light of the numbers, what we want to emphasize is something very simple. Those who raise taxes without planning, only concerned with finding sources of financing for state machinery spending, are limiting the expansion of markets and preventing competition from playing a natural and healthy role for economic development. This negative relationship suggests that the reason, and not the political interests, is that it must guide decisions in the present in this vital strategic field, which is the tax system.

With this study, we want to show that there is a better way to go than what we have been up to today and that it is within our reach. And, more than ever, it becomes a viable alternative to expand and give consistency to the positive agenda that all of us Brazilians are determined to take from the plane of ideas to the field of practical reality. The faster and more intense the actions, the greater the benefits for the country and the community.

kicker: For illegal competition to ebb we have to admit that today, a tax revolution is imperative

Emerson Kapaz - President of the Brazilian Institute of Competition Ethics (ETCO).