Author: Everardo Maciel *

Source: Gazeta Mercantil newspaper, Notebook A-3, 23/01/07

Governors understood that only with austerity of accounts can crises be avoided. Orhan Pamuk, Turkish writer awarded last year's Nobel Prize for Literature, said: “every now and then good news arrives”. This seems to be what is now happening with the majority of newly installed state administrations. The governors realized that managing imposes sacrifices on the ruler. Not everything is joy.

I celebrate the perception, among many, that the root of the states' difficulties lies precisely in the existence of a continued process of hypertrophy of the governmental machine. A significant part of the resources incorporated into the tax burden in recent years has financed unnecessary, often sumptuous, expenses, not to mention corruption.

Expenses grew exponentially and the quality of services, to say the least, remained poor. Elementary education and public health leave a lot to be desired. Public investments decrease year after year. The precariousness of Brazilian highways is an unequivocal testament to this situation.
Governors understood that they must undertake fiscal austerity at the beginning of their mandates, or they will be condemned to permanent crisis management. If there is no money, it is best to forget about salary increases, excessive spending on advertising, extraordinary funds for municipalities, parliamentary parties, etc.

It is true that there will always be resistance to austere policies. Union corporatism has gained a lot of strength in recent decades and thinks of the state as a source of income, and not as an instrument in favor of society. Attitudes like the one seen in Alagoas, where public buildings are invaded, in the name of unanswerable demands, are regrettable. Occupation of a public building is a crime and should be treated as such. In Brazil, however, there is a kind of tolerance towards this deplorable behavior. It reaches the absurdity of requesting repossession of a public building!

In this context, some state authorities say they will request financial assistance from the federal government. The Union barely has it for itself. There is only a little change left that is channeled into voluntary transfers to states and municipalities. These are so-called parliamentary amendments – in general, an explicit form of waste of public money and an instrument of political blackmail.
Seeking support from the federal government is simply the result of misaligned fiscal federalism. The Constitution establishes with absolute clarity the sharing of public income between the Union, states and municipalities. Many call this a “federative pact” – an expression whose ambiguity serves as the basis for the most varied forms of resistance to changes that interest the construction of true fiscal federalism. At the same time, there has never been transparency in the distribution of public charges between the federative entities. This asymmetry is what makes complaints from governors and mayors possible and political manipulation of intergovernmental transfers.

The Constitution, in its article 23, sole paragraph, provides for the institution, through a complementary law, of coordination mechanisms between federative entities, which would be a form, albeit timid, of structuring fiscal federalism. After 18 years, this complementary law has never been considered. No one seems to be interested in greater precision in sharing skills. Negotiation and bargaining are more compatible with our worst political traditions.

By the way, the recently promulgated Constitutional Amendment nº 53, of last December, took care of replacing, in the sole paragraph of art. 23, the expression “complementary law” for “complementary laws”, as if that were to mean something important. As for the complementary law or complementary laws, as the constitutional text now intends, there is not even a project.

The good signals from the governors contrast with the erratic movements of the federal government. Long periods of disconcerting silences are followed by confusing and pretentious announcements of measures. None of them to modernize our archaic and paralyzing labor legislation, firmly face the Social Security problem, build a new fiscal balance combining a reduction in current spending with a reduction in fiscal pressure or to point out a realistic and effective path to eliminate inequities in the system. tax. It is preferable to maintain indulgent complacency with the increase in current expenditure and announce specific relief from the tax burden.

These tax breaks do not necessarily result in economic growth or improved quality of life. It all depends on a complex set of variables, ranging from the degree of competitiveness of the benefited sector to the combination with the tax incidence that is the responsibility of other taxing entities. However, one thing is certain: the tax system is becoming increasingly complex, with increased compliance costs and greater vulnerability to tax evasion and avoidance.

The PIS/Cofins legislation is unintelligible, even to experts. The so-called “Supersimple” actually deserves to be called “Ultracomplex”. Corporate Income Tax (IRPJ) is following the opposite path of recent years, taking on exceptions to the general rules and, as a result, becoming more susceptible to tax planning, especially for large taxpayers. In short, we remain aimless, although with moderate hopes. The show continues. Growth will wait longer.

* Tax consultant and former secretary of the Federal Revenue.