Decrease the weight of taxes

By ETCO
29/07/2011

Author: Revista Época - Internet

Source: Agência Senado - Brasília / DF - 08/11/2010

José Fucs, with Aline Ribeiro, Humberto Maia Junior and Marcos Coronato

Few issues arouse as many passions in the economic area as taxes. Among the emerging countries, Brazil today has the highest tax burden. It should reach 37% of the Gross Domestic Product (GDP) in 2010, according to the Brazilian Institute of Tax Planning (IBPT). Each Brazilian has to work, on average, 148 days a year just to pay taxes. This makes products and services more expensive, limiting consumption, and decreases the competitiveness of Brazilian companies abroad. “You can't compete with China with a tax burden that, on average, is double that of them,” says economist Paulo Leme, from investment bank Goldman Sachs.

Taxes are not only high, they are complicated. According to a survey by consultancy Ernst & Young and the World Bank, Brazil is the country where companies spend the most time with tax bureaucracy: 2.600 hours a year. In Mexico, it is 517 hours. In Argentina, 453.

With the government increasing its spending instead of saving, it is unlikely to agree to discuss tax cuts. Instead. President Lula declared that the government needs high taxes to strengthen the state. However, there is growing resistance in society to the tax base. The Efficient Brazil Movement and the Brazilian Bar Association (OAB) plan to collect 1 million signatures in support of a project to reduce the tax burden and provide greater transparency to taxes. The movement also articulates a bench to support the cause in Congress. The idea is to approve a device whereby government spending will have to grow 1 percentage point less than GDP each year. The goal is to reduce the tax burden to 30% of GDP by 2030. By charging a lower percentage, the collection may even increase. says Carlos Schneider, organizer of Brasil Eficiente. "Otherwise, it will be R $ 9 trillion."

 

 

Why is it a problem
The tax burden of 37% of GDP drains resources from the private sector, makes products more expensive and compromises the country's competitiveness

How to solve

Set a limit for the expansion of public spending below GDP growth

The difficulties

There is in the government the notion that the State must be strong ”and, for that, it needs to charge high taxes

Dilma's position

Dilma says she is in favor of tax reform and reduced rates for micro and small companies