Author: Armando Monteiro Neto

Source: O Globo, 31/03/2009

There is consensus between industry leaders and the National Congress that Brazil can no longer postpone tax reform. We believe that this perception is now also common to citizens, due to the weight of taxes in their daily lives. The modernization of the tax collection system is essential to adapt Brazilian standards to international standards, strengthen the economy in the face of the global crisis and prepare the country for a new growth cycle.

 

These transformations have long been expected, but countless times postponed due to the complexity of the obstacles and the difficulties pertinent to a universe of multiple actors and interests. The pessimists on duty foresee the same outcome for the current movement around the proposal in progress in the Chamber of Deputies. We don't have that assessment. The crisis made the option for change imperative.

 

Even the most skeptical recognize the need for more forceful and far-reaching actions to avoid a recessionary process in the country.

This vision marked the recent International Tax Reform Seminar, held by CNI at its headquarters in Brasilia, when the commitment to revise the tax system was renewed. There, the bases were established for the great national articulation and the understanding essential for the immediate approval of the proposal.

 

We learned important lessons from the international experience. The first is that many nations are improving their tax systems to create environments that are more conducive to growth and trade integration; the second, that there are reform patterns, notably in relation to VAT, which have been followed by most countries. The transformations were carried out under the most varied circumstances.

 

Finally, we stress, in the case of federative regimes, the need for coordination and consultation between state entities, but under strong federal leadership.

Why can't Brazil be successful, if Central European countries, ex-communists, and countries that applied for European integration were able to change their tax systems to a global standard? The Legislative's commitment to adapting the Brazilian tax system to international standards is fundamental. The complexity and dysfunctions of the rules in force compromise the ability of companies to expand and encourage informality.

 

The text in the Chamber contains advances in the direction of simplifying the system, reducing investment and exports.

It also reduces the charges on the payroll, promotes the replacement of some federal taxes by VAT-federal and proposes the end of cumulative.

Simplifies and harmonizes the Tax on Circulation of Goods and Services (ICMS) through the adoption of a single federal legislation and improves the mechanisms for using tax credits and guarantees to taxpayers.

 

But we know that there are points that must be improved. It is essential to speed up the transition process and speed up the schedule of exemptions, so that the benefits produce more immediate effects on the economy. Among the necessary changes are also the disallowance of the “charging from within” system and the establishment of a rule that prevents the increase and creation of taxes.

 

Changing the tax system is a complex task in any democratic society. It requires dialogue and the construction of understandings around the interests of the various social segments. The principles of tax reform defended by businessmen were endorsed in regional and national debates promoted by CNI throughout 2007 and 2008.

 

The crisis is not an argument to postpone tax reform. We will improve our expectations and promote structural changes capable of reducing the impacts of the global recession. We need to leverage the competitiveness of companies and prepare the basis for sustained economic growth.

 

ARMANDO MONTEIRO NETO is president of the National Confederation of Industry (CNI).