Simplification of the tax system


Author: Celso Diniz Gonsalves

Source: O Globo, 29/11/2007

We have heard almost daily criticisms of the current tax burden. It is clear that the significant weight of taxes hinders the country's development, scares away investors and encourages informality. However, little is said about the irrationality of the Brazilian tax system.

Today we have taxes that are levied on practically identical bases (the Income Tax and Social Contribution); contributions on companies' billing (PIS and Cofins); taxes and contributions required on imports of inputs, goods and capital goods (Import Tax, IPI, ICMS, ISS, PIS and Cofins) and taxes on goods or services produced or traded (IPI, ICMS and ISS). Add to them the IOF (which is levied on five hypotheses of financial transactions), the Income Tax at Source, the Cide, IPTU, ITCMD, ITBI, ITR, IPVA and the CPMF, without forgetting the contribution to the INSS and its penduricalhos (thus understood the various contributions to the “S” system, occupational accident insurance, education wages, mandatory union contribution), in addition, of course, to the federal, state and municipal taxes instituted under the most diverse labels.

Unfortunately, the taxpayer is a real hostage to numerous rules that establish rules, not only for calculation and payment, but also for the declaration of those taxes. That is, in addition to bearing a very high tax burden, it is also the victim of a hellish bureaucracy that requires it to periodically provide detailed information on each tax due.

This system, the result of the mistaken premise that the Federative system necessarily requires autonomy for each taxing entity to institute and regulate its own taxes, and the resistance - especially of the Union - to share its revenues with states and municipalities, is absolutely incompatible with the reality of a country that yearns for modernization and insertion in the globalized economy.
"It is humanly impossible, even for the most knowledgeable operators, to strictly comply with all administrative acts that are daily edited by the competent authorities"

This supposed autonomy has led to the multiplication of types of taxes and contributions, resulting in a real monster that does not hesitate to asphyxiate the taxpayer who does not know, in detail, the complex framework of rules, a true “tax carnival”.

Now, it is humanly impossible, even for the most knowledgeable operators, to strictly comply with all laws, provisional measures, decrees, ordinances and resolutions and other minor administrative acts that are daily edited by the competent powers. This shows the enormous distance that separates the bureaucrats, who set standards, from the reality experienced by the taxpayer, especially the small business owner.

The result of this is that, in order to meet all the requirements provided for in the tax legislation, companies are required to maintain departments specialized in the control and payment of taxes or to resort to third parties who have the capacity to do so, bearing the respective burden. Ultimately, this cost is added to that of the taxes themselves and transferred to the final consumer, affecting the final price of the goods.

Worst of all is that, for the sake of absolute convenience, the taxing entities have resorted, more and more frequently, to taxation under the regime of source or tax liability, further burdening those who produce wealth and making it even more chaotic. our already complex and battered system.

This “burrocratic” chaos will only be resolved as soon as the Union, states and municipalities become aware of the problem and give up this supposed autonomy, facilitating the taxpayer's life and allowing greater control of tax collection, for the benefit of all.

Why not unify taxes that have the same calculation base and taxable event, sharing the result among the taxing entities, as, indeed, the Federal Constitution already provides in relation to income tax and IPI? Why not consolidate the legislation of each tax in the same legal diploma? Why not make life easier for the taxpayer, who has no alternative but to continue bearing the exaggerated bureaucratic burden, in addition to the tax?

It will be said, once again, that this phenomenon results from our Federative system, which imposes administrative decentralization. Nothing could be more false, since the republican regime has only reason to be if it serves the interests of those who chose it democratically. If instead of helping the system, it hinders those who contribute to their livelihood, then it would be better to review their convenience as soon as possible.

It is up to each of us to demand from our representatives in the constituted powers, at the three levels of the Brazilian federation, the rationalization of the tax system for the benefit of all, in parallel with the reduction of the tax burden. This rationalization will certainly bring benefits to everyone, including tax entities, and will increase the transparency of the administration, allowing each one to know exactly how much he is contributing to the cost of the State.

It would not be an exaggeration to foresee that this rationalization will lead to an increase in collection, due to the improvement of controls and the easy access of taxpayers to means of payment, without the need for any increase in the current burden. To do so, all that is needed is the will, courage and determination of our leaders in the search for a model compatible with our reality and our needs.

Celso Diniz Gonsalves is a lawyer and tax consultant