Social security collection with Simples increases 59%


Author: Antonio Perez

Source: Diário Comérico, Indústria e Serviços, 09/01/2007

The significant increase in social security collection through the Simples "system that facilitates the payment of taxes for Small and Micro Enterprises (MSEs)" signals a greater formalization of the Brazilian economy with the entry into force of the General Law for Micro and Small Enterprises. In the accumulated period from January to November 2006, according to the most recent data from the National Treasury, the collection of social security with Simples rose from R$ 4,5 billion in 2005 to R$ 7,3 billion – a real growth of 59%.  

The increase in revenue is a consequence of the increase in the share of social security in Simples' revenue (from 40% to 60% in 2006) and the revision of the maximum annual revenue limit for joining the system last year, which rose from R$ 1,2 .2,5 million to R$ 25 million. It is estimated that this change reduced the tax burden for a group of approximately XNUMX thousand formal companies and led a large number of MSEs to formality, increasing the pension fund.

The increase in collection through Simples, together with the growth of the formal labor market, caused the collection of the General Social Security System to increase by 14,2% in the period. “The reduction in the tax burden encourages formalization, as legality becomes economically interesting. At first, there is a drop in revenue. Afterwards, however, there is an increase in the collection base, which compensates for the initial loss”, says tax law specialist André Mendes Moreira, a partner at Sacha Calmon Advogados. 

Analysts estimate that with the entry into force of the General Law for Micro and Small Enterprises (MPEs), as of July this year, there will be the formalization of about 1 million small businesses, with the generation of 3 million jobs with a registered portfolio. The possibility of participating in Simples, in which all taxes and contributions, including the employer's contribution, are unified certainly attracts tax evaders to the formal market. After all, those who do not participate in the system, for example, need to pay 20% of their payroll to the INSS.  

Moreira stipulates one year, starting in July of this year, from the scheduled time for Simples Nacional to be regulated and come into force, so that there is a strong movement towards formalization. Otherwise, the government must review the rates provided for in the General Law on MSEs. “If there is no increase in the number of companies well above GDP growth, it will be necessary to calibrate the rates”, says the lawyer.  

Marco Aurélio Bedê, coordinator of the Observatory of MSEs of the Brazilian Service to Support Micro and Small Companies in the State of São Paulo (Sebrae-SP), believes that more time is needed for the effects of the General Law on formality to be perceived . “One should wait at least two years to assess the impact of changes in the market”, says Bedê.  

The fight for greater formalization should be reinforced with the publication, starting in March, of the informality index”, which is being prepared by the Getúlio Vargas Foundation (FGV) at the request of the Brazilian Institute of Competition Ethics (ETCO). “Today, the only measure on the informal market is the fact that 50% of workers do not have a formal contract”, says André Franco Montoro, who has just assumed the presidency of ETCO.  

The challenge is to make the level of formalization compensate for the loss of revenue with Simples Nacional. According to the Budget Guidelines Bill of 2007, the tax waiver of social security with Simples should be 5,6 billion this year, which means 0,25% of the Gross Domestic Product (GDP) and 4,29% of all pension fundraising.