Author: Joaquim Castanheira

Source: ETCO Magazine, April 2009

Pay attention to the following numbers of the Brazilian notebook market. At the
third quarter of 2008, 20% of equipment imported under the Acer brand
were officially declared in the IRS. In the case of Toshiba, this
proportion was 9%. These are, of course, very low rates. Well, in the bedroom
quarter of last year, this scenario became even more alarming. Only
18% of Acer computers and 5% of Toshiba entered the country legally. What
happened between one period and another to explain the increase in smuggling, as
suggest the numbers? Edson Luiz Vismona, president of Instituto Brasil Legal,
entity responsible for the survey, risks a response. “The big change
it was the advent of the world economic crisis. She can explain this sudden
expansion of illicit acts, ”he says. “Unfortunately, there is a relationship between a
one thing and another. ”
The example of the notebook import market reveals a
of the most perverse faces of economic crises. Alongside unemployment and loss
income of companies and individuals, ethical behavior is one of the first
victims of the retraction of productive activity. In these moments, the temptation grows
to adopt illegal practices, such as evading taxes, hiring employees without
signed portfolio, not respecting contracts or consuming products of origin
doubtful.

[Ana ottoni / Folha Imagem]

 

For consumers, this appears as a way to
compensate for the reduction in purchasing power. For companies, it is a way of doing
against the sudden drop in cash flow and profitability. Relief
The financial impact of these initiatives is as quick as it is misleading. "What,
at first glance, it looks like a solution to cash problems creates a huge
problem, which can jeopardize the very sustainability of the business ”,
alerts André Montoro, ETCO's executive president.

Montoro recalls that, quickly, these companies begin to reap the fruits of
decision to fall into informality. Debts, mainly tax, grow
quickly, putting the company on target for the tax authorities - which would prevent it, for
example, participating in public tenders. Labor liabilities go up and
becomes a difficult burden to bear, in addition to generating lawsuits filed
by employees. In addition, the company's image in the market generates
mistrust, either between banks and suppliers, either with customers or the
public opinion. “The gains are temporary, but the losses are long-lasting”,
sums up Montoro.

[Bio Barrier]

 

 

For economist Armando Castelar Pinheiro, professor at UFRJ and analyst at
Gávea Investimentos, both companies and workers, as well as the governments of the three
levels can take steps to minimize the risk of illegality. "Before
financial difficulties, a company should call suppliers, customers and
representatives of other links in your chain to renegotiate prices and terms ”,
suggests Castelar. “They are also affected by the crisis and have an interest in maintaining
the relationship with its partners within the legal framework. ” In extreme cases,
he recalls, companies have a legal way to gain extra breath.
This is the judicial reorganization law, which replaced the old bankruptcy.
This instrument offers a grace period for the company to balance its
indebtedness within a plan negotiated with creditors. At the beginning of this
year, there was a significant increase in recovery requests, according to
survey by Serasa Experian. In January and February 2009, 135 companies
appealed for the benefits of such legislation, compared with only 34 in the
same period of the previous year. “This is an interesting alternative for companies to
companies do not fall into the temptation of informality ”, says Pinheiro.

The sectors most susceptible to this “temptation” are precisely those with
higher tax burden. “In them, evasion creates a competitive advantage
huge, ”says César Simi, director of strategic planning at Souza Cruz,
leader in the cigarette market, severely hampered by smuggling and
falsification. “With the crisis, the increase in illegality appeared in our
horizon, ”says Simi, from Souza Cruz.

To understand Simi's concern, look at some indicators. Load
tax reaches 65% of the final price of cigarettes. A free pack of this weight comes out
much more affordable than a product that pays all its obligations.
Result: while Souza Cruz's cheapest brand costs R $ 2,40, it is
It is possible to find competitors charging between 1,20 and 1,50 reais for a pack of
cigarettes. The company's fear is that the economic downturn may interrupt, or
until reversing, the victories won by the sector in recent years. There are five
years, about a third of cigarettes sold in Brazil were counterfeit,
smuggled or benefited from tax evasion. Today, that proportion has dropped to
27%. The index is still high, but shows an evolution, the result of
stricter inspection and regulatory measures that inhibit the practice
illegal.

At this point, there is another headache for entrepreneurs who suffer from
unfair competition. In times of turbulence, such as the current one,
falls, also causing government budget cuts at all levels:
federal, state and municipal. Thus, resource dryness can deteriorate the
structure of the public bodies responsible for inspection, with a reduction in the
number of professionals or access to technology. A vicious circle is created.
With less money, enforcement becomes looser, which generates a drop in
collection. The consequence is a tighter budget and, by table, the
downsizing the one intended for inspection - and so the circle is complete. O
businessman Hoche Pulcherio, president of the Brazilian Association of the
Sodas (Abir), suggests that governments take the opposite path: not only
increase the rigor of inspection, but do an intelligent inspection based on
in taxes automatically declared by mechanisms such as flow meters and
the production identifier system established by federal revenue and
state with adequate volume and coverage. This would create an antidote against
effects of the economic crisis. “Inspection is self-financing,” he says. The
taxes represent 35% of the final price of a soft drink. That load
transformed the industry into an attractive target for informality. Thanks to
measures such as flow meters and the action of inspection bodies, tax evasion
dropped from 35% in the late 90s to 20% in 2008. “It is possible to lower this share
to 10% ”, says Pulcherio. “But the main weapon for this is the
inspection. ”

 

[Arch. Abir]

 

This is just one of the weapons that governments have to
prevent the crisis from becoming a source of motivation for illegality. Other
an equally powerful instrument is the stimulus to economic activity. There is
basically two forms of incentive. One is to reinforce investments
public, especially in the area of ​​infrastructure - and the Program for the Acceleration of
Economics is an example. Another is to relieve sectors with a strong impact on production and
in job creation. In this case, the reduction in the IPI rate for the sector
automotive industry brought back to the dealerships, in January and February,
customers who had disappeared at the end of last year. State governments also
followed a similar path. In São Paulo, a set of stimulus measures
came out of the oven in mid-February. In total, the state government will inject
almost 21 billion reais in the economy. The funds will be allocated to works
public services, such as the construction of new subway and Rodoanel stations, and
financing for private industries, mainly auto parts and
machines and equipment. “We have an austerity budget, but it is a budget
development, because at the same time, we have a large part of it
dedicated to investments in the sphere of direct administration, autarchies and
companies, ”says São Paulo governor José Serra. “It is a budget
austere and developmental at the same time. ”

 

[Source: IBGE Produced by: Macrohead Consultoria Econômica * Seasonally adjusted, the
market prices]

Interestingly, in this stimulus package, Serra included measures
clearly aimed at reducing informality. One is the application,
“In its fullness”, as the governor says, of a federal law called
Individual Microentrepreneur. With about 50 reais a month, small businesses
become formal and, in this way, can enjoy the benefits that this
condition allows, such as access to bank credit. The government of São Paulo
it also intends to speed up the process of regularizing urban properties. There is
about 800 thousand properties in an irregular situation in the State. An approved law
at the Legislative Assembly will reduce registration costs by 1.200
reais to 96 reais. But does this encourage the economy and job creation? Saw
responds. “It is logical that it has to do with employment, because the person starts to have the
property, ”he says. “She can get credit, she can sell. This heats up, the
formality benefits economic activity because it has effects of
chain over the rest of the economy. ”

The emphasis on the labor market is justified. As soon as the first
signs of turbulence appear in the economic horizon, the level of employment falls
with signed work card. “The high burden of taxes, fees,
contributions that affects the formal contracting creates this anomaly ”, says
professor and consultant José Pastore, one of the most experienced specialists in
labor relations in the country. Pastore says the legislation offers ways
so that companies avoid layoffs, without necessarily falling into illegality.
One of them is Law No. 4.923, which regulates the reduction of working hours and
salary. Employers and employees have used this alternative in these
first months of economic downturn. But the use of this feature is no longer
widespread because it generates a certain amount of legal uncertainty, as Pastore states. "The law
determines that financial difficulties have to be properly proven,
but it doesn’t specify what that means, ”says the professor. “In times of crisis,
everyone agrees. Afterwards, however, unions or workers may question whether
the company was really going through difficulties and asking in court for compensation
share of unpaid wages. ” More: the same law obliges the company
mount improvement courses according to pre-established parameters, such as
number of hours, curriculum, teacher profile, location, among others. "THE
regulation is so detailed and the risks so great that the company chooses to fire
instead of negotiating a reduction in wages and hours, ”says Pastore. For him, the
solution is to simplify labor legislation and give more freedom to
negotiation between companies and unions.

Finally, there are several measures to minimize the threat of increased practices
illegal in the face of the economic downturn. But the main antidote is in the posture
companies, as noted by ETCO's Montoro. “Entrepreneurs must maintain their
ethical principles in any situation, ”he says. “They are the ones who guarantee
only the image of a company, but also the sustainability of the company itself
business.

[Rogerio Pallatta / Valor; Anna Carolina Negri / Valor]

 

SURVIVAL GUIDE

Companies and governments can take a number of measures to minimize
the effects of the economic crisis and avoid the risks of informality. See some
suggestions gathered between experts and entrepreneurs heard by the magazine
ETCO

COMPANIES

• Summon suppliers to discuss prices and payment terms. There is
a strong argument in this regard: when a company goes through difficulties,
suppliers will also be affected. The partnership in this case is not just
desirable, it is a necessity.

• Seek creditors before delaying payments. The company can open
negotiations to review terms and interest rates, in order to adjust the
disbursements to the new cash flow reality.

• Meet with workers' representatives and study, in
together, the alternatives to avoid dismissals and hiring without
signed portfolio. It is important to establish a good flow of communication with
employees so that they are aware of the situation.

• Ultimately, study the possibility of adhering to the Recovery Law
Court, which gives grace period for the payment of creditors, provided that the company
submit a recovery plan approved by them.

GOVERNMENTS

• Review the budget, seeking to reduce spending on costs and
preserving (if possible even increasing) public investments,
especially in infrastructure. Improvement in this area helps companies and
economy as a whole to increase its productivity.

• Create tax incentives for sectors that have an extensive chain
productive, in order to have a multiplier effect. Labor segments
intensive work must also be supported, thus combating unemployment.

• Study ways of easing the tax burden, making it possible to improve the
cash flow of companies and giving the consumer budget a break. Part
that money will go to consumption and investments and will return to
State in the form of collection.

• Increase enforcement against tax evasion, smuggling and
counterfeiting of products. The costs of these actions will be covered by the increase in
collection from the tightening of inspection.