Ideal rate for the new ICMS: 10,7%
Source: Diário do Comércio, 06/12/2005
While the National Congress investigates the scandals of the “monthly allowance” and the Post Office, businessmen are concerned with the direction of the tax reform, more specifically with the rates of the Tax on Circulation of Goods and Services (ICMS). Thinking about it, the Brazilian Institute of Competitive Ethics (Etco) brought together more than 200 entrepreneurs yesterday to present a study that reveals three possible scenarios of post-reform Brazil. “We created a simulator that allows us to assess what the supposed effects of the tax reform would be,” explained Fernando Garcia, from GV Consult, who carried out the work, during a seminar held in the capital of São Paulo.
It is no wonder the concern of the business community. According to the governor of the state of São Paulo, Geraldo Alckmin, the ICMS represents 90% of the state revenue, there are more than 50 rates in the country and several for the same product.
One of the most optimistic scenarios outlined by GV Consult points to the adoption of an average nominal rate of 10,7% for the state tax, which would increase GDP by 3,47%, decrease inflation by 1,24%, increase the revenue of 0,09% (R $ 117, 1 billion in total) and would generate 2,3 million jobs. “This hypothesis gives us hope that we can move forward with the ICMS problem. I was excited, ”commented former Finance Minister Delfim Neto during the seminar.
Considering the adoption of the 10,7% rate, of the 42 economic sectors analyzed, the only ones that would have a decrease in real added value would be the dairy industry (1,33%), public administration (0,89%), industrial services public utility (0,68%) and informal civil construction (0,45%).
In the same scenario, the survey by GV Consult accounted for the impact of the tax reform in each region of the country and only the Southeast would have an increase in the collection of ICMS (1,88%). The North would collect 0,88% less, the South 1,30%, the Northeast 1,95% and the Midwest 11,25%, which demonstrates the importance of creating the compensation fund for states that lose revenue with the reform.
In another case, GV Consult maintained the average nominal ICMS rate of 11,5%, which is the one used today. With it, the Gross Domestic Product (GDP) and inflation would decrease 0,12%, and 0,17%, respectively. The total collection of the tax would add up to R $ 118,8 billion, reflecting the increase of 0,47%, and there would be a loss of around 83 thousand jobs.
If the average nominal rate is 13,6%, GDP would fall further: 5,96%. In addition, inflation would rise by 2,39%. In compensation, there would be a 12,86% increase in tax collection, totaling R $ 136,1 billion, but the drop in the number of jobs would reach 4 million. “We are going to take the study to Congress. We want to produce and we cannot wait ”, warned Emerson Kapaz, president of Etco.
RELATED
Interview: Hamilton Dias de Souza
Hamilton Dias de Souza (*), member of the ETCO Advisory Board since its foundation, in an exclusive interview, evaluates the importance of competition ethics to improve the business environment in the country.
Ideal rate for the new ICMS: 10,7%
Source: LegisCenter, 16/08/2005
While the National Congress investigates the scandals of the “monthly allowance” and the Post Office, businessmen are concerned with the direction of the tax reform, more specifically with the rates of the Tax on Circulation of Goods and Services (ICMS). Thinking about it, the Brazilian Institute of Competitive Ethics (Etco) brought together more than 200 entrepreneurs yesterday to present a study that reveals three possible scenarios of post-reform Brazil. “We created a simulator that allows us to assess what the supposed effects of the tax reform would be,” explained Fernando Garcia, from GV Consult, who carried out the work, during a seminar held in the capital of São Paulo.
It is no wonder the concern of the business community. According to the governor of the state of São Paulo, Geraldo Alckmin, the ICMS represents 90% of the state revenue, there are more than 50 rates in the country and several for the same product.
One of the most optimistic scenarios outlined by GV Consult points to the adoption of an average nominal rate of 10,7% for the state tax, which would increase GDP by 3,47%, decrease inflation by 1,24%, increase the revenue of 0,09% (R $ 117, 1 billion in total) and would generate 2,3 million jobs. “This hypothesis gives us hope that we can move forward with the ICMS problem. I was excited, ”commented former Finance Minister Delfim Neto during the seminar.
Considering the adoption of the 10,7% rate, of the 42 economic sectors analyzed, the only ones that would have a decrease in real added value would be the dairy industry (1,33%), public administration (0,89%), industrial services public utility (0,68%) and informal civil construction (0,45%).
In the same scenario, the survey by GV Consult accounted for the impact of the tax reform in each region of the country and only the Southeast would have an increase in the collection of ICMS (1,88%). The North would collect 0,88% less, the South 1,30%, the Northeast 1,95% and the Midwest 11,25%, which demonstrates the importance of creating the compensation fund for states that lose revenue with the reform.
In another case, GV Consult maintained the average nominal ICMS rate of 11,5%, which is the one used today. With it, the Gross Domestic Product (GDP) and inflation would decrease 0,12%, and 0,17%, respectively. The total collection of the tax would add up to R $ 118,8 billion, reflecting the increase of 0,47%, and there would be a loss of around 83 thousand jobs.
If the average nominal rate is 13,6%, GDP would fall further: 5,96%. In addition, inflation would rise by 2,39%. In compensation, there would be a 12,86% increase in tax collection, totaling R $ 136,1 billion, but the drop in the number of jobs would reach 4 million. “We are going to take the study to Congress. We want to produce and we cannot wait ”, warned Emerson Kapaz, president of Etco.
RELATED
Interview: Hamilton Dias de Souza
Hamilton Dias de Souza (*), member of the ETCO Advisory Board since its foundation, in an exclusive interview, evaluates the importance of competition ethics to improve the business environment in the country.
