New Year and the recurring budget scam


Author: Everardo Maciel

Source: Gazeta Mercantil, 08/01/2009

January 8, 2009 - In the context of an agitated international scenario, with emphasis on the bloody war in the Gaza Strip and the uncertainties about the unfolding of the international financial crisis, in this Pindorama we will resume old discussions about old problems.

Once again, the urgent need for tax reform will be proclaimed, even though the vast majority of those who defend this flag have no idea what it will become. The main motivation of this campaign is to reduce the tax burden. A picturesque “impostometer” has been instituted, which aims to measure daily how much tax has already been paid in the year, as if it were a gas pump. However, there is no initiative to curb current public spending, which is the real cause of the expansion of the tax burden.

Federal, state and municipal budgets were approved at the end of the year. With the exception of those directly interested in increasing spending (parliamentarians, contractors, civil servants, etc.), no one took notice of the matter. From then on, the recurrent budget hoax begins: resource constraints, the release of parliamentary amendments as a spurious way to win political support, open-air corruption due to overpricing of works and coverage of new expenses by increasing the tax burden.

In the short term, I am completely skeptical about the possibility of fiscal changes, covering the size of the tax burden and the restructuring of public spending and the budget process. From what we can see today, the only reform that will thrive will be the silly and costly spelling reform.

If the Mabel Project for tax reform prospered - a degraded version of the original sufficiently bad project of the Executive Branch - those who bet on reducing the tax burden would be in for a huge surprise. The opposite would occur, since the taxes would have to increase to compensate for the planned federal transfers to states and municipalities, such as the “ICMS exchange”, intended to cover inevitable state losses resulting from the implementation of the mythical principle of destiny, and the development fund regional, conceived as a way to “counterbalance” the supposed loss of power of the states to illegally practice the fiscal war. Fortunately, it seems that the chances of approval of this tax pantomime are remote.

We will continue to deplore our personal and regional income inequalities and cultivate the illusion that these issues are resolved through assistance programs of all kinds, such as Bolsa Família.

No one can fail to recognize the importance of these programs in conditions of extreme poverty. Recognition, however, does not dispense with the obligation to investigate and try to remove the causes of poverty, instead of perpetuating welfare, despite its notable electoral “virtues”.

Is it not perceived that the factual impossibility of observing the current labor standards by micro-companies is the main reason for keeping 60% of the Brazilian workforce informal, as Professor José Pastore rightly points out? Wouldn't it be the case of instituting Simples labor, with specific rules for microenterprises?

Shouldn't we think about a “way out” for Bolsa Família beneficiaries? Senator Álvaro Dias, at the end of the year, presented a bill that allows companies that hire beneficiaries of that program to deduct from the employer social security contribution an amount corresponding to the paid scholarship. The tax cost is obviously nil, but it represents an enormous social promotion for the citizen, as there is a rescue of his condition of assisted to grant him that of worker included in the formal labor market.

I hope that in the course of the year we will be guided by common sense in facing the economic crisis, putting aside voluntaristic outbursts or suicidal tactics. It is unwise to underestimate real problems or to imagine that the crisis is dealt with by expanding current government spending. It is naive to put much hope in the Obama administration, as its attention should be focused on solving the internal problems of the United States, without the breath to take care of the problems of other countries.

A brake on current expenditures, maintenance of public investments, adoption of compensatory measures for a probable loss of revenue, flexibility of labor rules and parsimonious reduction in interest rates, in my opinion, should be part of a basic anti-crisis prescription. Most likely, however, we will follow the route of improvisations and postponing solutions.

kicker: Of the reforms, the only one that will prosper is the costly spelling reform

(Gazeta Mercantil / Caderno A - Page 3) EVERARDO MACIEL * - Tax consultant and former secretary of the Federal Revenue. Next article by the author on January 29)