Underground economy is still big in Brazil


Source: Jornal do Comércio - RS - 24/09/2012

The Underground Economy Index (HEI), which measures the percentage of informal work, reached 16,8% of the Gross Domestic Product (GDP) in the last year, at an estimated value of R $ 695,7 billion. The data are from a semiannual study carried out by the Brazilian Institute of Ethics in Competition (ETCO) in partnership with the Brazilian Institute of Economics of the Getulio Vargas Foundation (IBRE / FGV). However, this is the lowest percentage registered since 2003. However, the data also indicate that the growth in formal employment, which is one of the main factors responsible for this fall, should stagnate as of 2012. And, according to the researcher responsible for the study from IBRE / FGV, Fernando de Holanda, credit expansion continues to be one of the biggest motivators of formal work. ETCO Chief Executive Roberto Abdenur highlights the urgency of measures to boost employment. “We are in a favorable moment for the revision of a series of rules that have historically been preventing the healthy growth of our economy. Rules that push small entrepreneurs into informality, that indirectly favor the production and trade of illegal products, and facilitate tax fraud ”, he concludes.

One of the less publicized related effects since the federal government decided to lower taxes in order to combat the crisis that broke out in September 2008 has not been remembered. It is the fact that, with less taxes, informality has also decreased in Brazil, which is good for everyone, especially businessmen. The tax relief from the government's incentive policy contributed to the reduction of the growth rate of the informal economy in relation to the Gross Domestic Product (GDP). The evolution of the informal economy was only 2% between December 2008 and June 2009, almost one percentage point above the 1,1% accumulated GDP variation in the first half.

Taxing less on a larger basis is ideal for an economy such as that of our country, especially if we take into account the fact that classes D and E are being incorporated into consumption. This is so true that the so-called white line of household appliances, such as refrigerators, washing machines or dishwashers, are selling like never before. As in all crises, also in this one, which we are going through, although with problems, it left lessons that can be valuable, if well used. One of them is precisely this, spoken for years by the most respected economists in Brazil and remembered by businessmen who bear heavy tax burdens: less taxes equate to less tax evasion and an increase in the number of people who have the courage to enter commerce, work or be formal microentrepreneurs in different segments of the economy. So, that federal, state and municipal authorities do not miss the chance to study how to maintain certain incentives and, even better, facilitate the integration of those who want to work under the legislation. As long as it is simple, cheap and easy to fulfill, without bureaucracy and unnecessary costs. It will be better for everyone.