Author: Claudio Haddad

Source: Valor Econômico, 06/09/2007

The CPMF suffers from the serious defect of being a cascading tax, but it has the
quality of having low cost of collection. Although the final impact of a
tax is difficult to determine, it also tends to be progressive, as
the wealthy, in terms of income, make more financial transactions than
the poor. Its defect, however, overcomes the qualities and, in a structure
ideal tax rate, it would participate at most with a small rate, such as the
0,08% that is being suggested in one of the proposals under debate. But the CPMF is not the
single ugly duckling in our tax structure. This is a real
monstrous and there's no use trying to beautify it without attacking the causes that make it
like this.

In the current scenario, CPMF should not be extinguished

The main point of the question is the growth in public expenditure, which continues to
being the country's main vulnerability. Having been, for decades,
financed by the inflationary tax, after the Real Plan it became
covered by indebtedness and tax increases. The Law of Responsibility
Approved in 2000, imposed discipline on state finances, but did not
restricted the federal government, whose expenditure (excluding interest) has been
last five years at the rate of 0,58% of GDP per year, as we can see in the graph.
Given the increase in current expenditure already announced for next year and the
continued structural growth in pension spending, everything indicates that
that trend will continue, which does not seem to concern the government. The agenda of
reforms were forgotten - or even archived - and the new economic team proposes
an acceleration of infrastructure spending, with no counterpart to cuts in
other areas.

Asphyxiate the country with a tax burden that exceeded 25% of GDP in 1990
to 36% in 2006 and continues to grow is bad, but going back to the old regime of
financing the public deficit by inflation is even worse. Given the volume of
expenses, replace the CPMF revenue, estimated for this year at more than R $ 36
billion, would require an increase in indebtedness or some other tax. Such as
first option, in addition to representing more future taxation, would put the
stability, reversing the downward trend in debt and the second would have the
high probability of exchanging a bad tax for a worse one, there is no
alternative to renewing the CPMF at the current rate. Argue the
otherwise, appealing to the formalism that the contribution was instituted as
that the government would have other sources of revenue to replace it, it is
ignore the budgetary reality or act in bad faith.

To reduce the tax burden without putting the economy at risk, it is
essential if you start a serious discussion about the size and allocation of
Public spending. Spending more on education and health or pensions,
that already absorb 12,5% ​​of GDP? Transfer more money to NGOs or invest in
infrastructure? Increase spending on civil servants or efficiency
public administration? Give free education at public universities to those who can afford it
or spend more on research? In this discussion it is essential to include the waivers
and invisible subsidies that pass outside the budget, but which
increase public debt and, consequently, interest expenses.

An example of invisible spending is the financing extended by BNDES to TJLP.
Between June 2006 and 2007, the average balance of BNDES credit operations
consolidated in national currency (practically all to TJLP) was R $ 111 billion.
In the same period, the accumulated Selic rate, the government's basic funding rate
federal government, was 5,86% above the TJLP. That is, in 12 months these operations
transferred R $ 6,5 billion as a subsidy to borrowers, equal to 70% of the amount
planned for Bolsa Família this year, and given the concentration of
bank operations, the ten largest borrowers must have received more than 50%
of this value. This subsidy is justified, mainly taking into account that
for large borrowers is the capital market already a viable alternative?
As reported (Valor, 27/08), issues of shares and debentures reached
R $ 32 billion until July, exceeding the BNDES disbursement. Why protect and
subsidize the borrowers of that bank to the detriment of other companies, with
equally worthwhile projects, whose controllers have to follow strict rules
governance and dilute its participation through primary share issues?
Why the resources for the former would have to come from the worker and the government
when could they be extended by investors under competitive conditions?

Unfortunately, transparency and serious discussion about control and
choice between public spending alternatives is of no interest to anyone. To the
groups that benefit from the myriad of programs and grants, it is best to leave
everything as is, with the greatest opacity possible. Also for ideologists who
think that public spending is the salvation for the country's ills, as well as the
politicians for whom it is easy and comfortable to spend other people's money. Discussion only
if it is peripheral, such as CPMF. In the absence of transparency and in the world of
pretend, it is better to renew the CPMF for another three years. It's worse without it than
with her.

Claudio Haddad is CEO of Ibmec São Paulo and president of
Veris Educacional SA's Board of Directors and writes, every two weeks, to
Thursdays.