Source: DCI, 06/03/2009

SÃO PAULO - Amid the political dispute over the tax reform vote, the Organization for Economic Cooperation and Development (OECD) says it supports the initiative to change Brazilian legislation. "This message was clear," said Luiz Roberto Peroba, a tax attorney at Pinheiro Neto Advogados and a member of the team that collaborated in formulating the report of the matter's rapporteur, Deputy Sandro Mabel (PR-GO).

“The international community welcomes Brazil's initiative. I could see this in the meetings I attended with the OECD in Paris and New York. The general interest was to know when the new system would be implemented, because that implies simplification of the process and greater legal security ”, he said. "Just to name a few examples, reducing federal taxes from nine to two and turning 27 laws into one, are measures that reduce uncertainty and can be considered advances," said the lawyer.

The rapporteur's strategy of bringing OECD support into Congress may have been crucial in changing the mood of parliamentarians. Scheduled to go to plenary this month, the Reformation was being undermined by the opposition and sectors unhappy with the proposal. The financial crisis, for example, has been used as an argument to suggest that the time for a change in tax legislation is not opportune. "The OECD's response to this is that when the economic turmoil passes - at the time of recovery - investors will look to Brazil and that is why it is better to fix the system now and be prepared for the future," said Peroba. Among the advantages of implementing VAT, the tax official highlighted the possibility of entering into international treaties. “On the OECD side, the interest in collaborating with the proposal is tremendous. Just look at the size of our economy, ”he added.

During the debate held yesterday, in Brasília, at the Special Tax Reform Commission, representatives of the international organization presented a series of reform models implemented in the last 20 years worldwide and drew attention to the examples of Australia and Canada - among the 30 OECD member countries, these are the ones that most resemble the Brazilian case, in which taxes are divided between a central government and state governments.

“The Value Added Tax [VAT] model suggested in the text of the rapporteur has few differences from those practiced in the rest of the world”, he explained. According to Peroba, there is no single reform formula, each country has to take into account its particularities. He also said that although no model can be exported from one country to another, Brazil can take advantage of international experiences. "VAT has two advantages: it is efficient and it does not affect those who pay less."

In the OECD, only the United States does not adopt the value added tax system. For the OECD, this is yet another reason that reinforces the need for the Brazilian economy to adopt a single value added tax, as is a trend worldwide.

Recommendations

The OECD recommended simplifying taxes and reducing rates. The director of the Organization's Center for Tax Administration and Policy, Jens Lundsgaard, said that Brazil is “testing the world limits” with the current tax rates. Lundsgaard said that the tax rates in Brazil are among the highest in the world, although this does not reflect in a higher tax collection - because the tax base is lower than in other countries. For him, the challenge of tax reform, in addition to simplification, is to increase the tax base, so that the rates can be reduced.

To do this, he said, taxpayers need to believe that taxes are fair. "Currently, it is very complicated to administer taxes in Brazil, which are high, and to prevent entrepreneurs from spending time thinking about taxes, but having ideas on how to become more competitive," he said.

For the head of the OECD Consumption Taxation Unit, David Holmes, the Australian model would be the best. In 2000, Australia replaced state taxes with a single national system, but in which resources are collected by the government and allocated to states. Thus, Australians resolved their version of the fiscal war. The second best option, for Holmes, is the Canadian model. In this country, a single federal tax has been implemented, with a rate of 5% on added value, and each province can implement supplementary taxes.