Source: Diário da Manhã - GO - 23/07/2009

Usually, both in Brazil and in other parts of the world, when it comes to tax reform, the issue is treated in a restricted way. The priority is always to recover the net tax burden of the public sector. Provisions such as combating tax evasion, taxing capital gains and reducing incentives and subsidies are often assessed as a means to increase government revenue. Aspects related to the efficiency of the tax mechanisms, their equity, their costs, their incidences and other important points are relegated to the background.

The broad tax reform that Brazil needs implies discussing all of these issues. However, within a context in which the economic policy maker is not restricted to existing fiscal institutions.

Brazil has one of the most complex tax structures in the world. There are countless forms of taxation. There are about twelve taxes and dozens of fees and contributions. Finally, a paraphernalia of forms and means of taxation that makes any reliable conclusion about the characteristics of the Brazilian system impossible. There is no way to know precisely whether it is regressive or not; what are its allocative impacts; what is its efficiency. A survey by the World Economic Forum classified the Brazilian tax system as the most inefficient among the 117 countries consulted.

In January 1990, in an article published in the newspaper Folha de S.Paulo, entitled “For a tax revolution”, I proposed a new tax system called the Single Tax on Transactions. The proposal demarcated a dividing line between orthodox tax thinking, based on the maintenance of the current declaratory tax system, and an innovative current that proposed as a tax base a simple, automatic, comprehensive and low-cost structure, embodied in the taxation on financial transactions through the banking system, a check tax.

The proposal to create a tax collection system based on the principle of single taxation has historical roots that go back at least three centuries. The difficulty of its implementation has always been the impossibility of identifying a tax base broad enough to allow the necessary collection with moderate rates. The conditions for identifying a base capable of meeting the needs of the Single Tax arose with the verification that the Brazilian economy contemplates a reduced level of monetization (3% of GDP). Thus, the financial movement in banks would be the way found to unify taxes efficiently and effectively.

I have been studying the Single Tax for almost twenty years, which has already become a project that can be voted on in Congress, and in the last few days I launched in the United States a new contribution to the debate which is the book Bank transactions: pathway to the single tax ideal (available in www.amazon.com/books). The work will be an important reference so that the dreamed Brazilian tax reform can be carried out in line with the real needs of the suffering Brazilian taxpayers.

Marcos Cintra holds a PhD in Economics from Harvard University (USA) and is a professor and vice president of Fundação Getulio Vargas