Source: Jornal do Brasil, 02/11/2007

RIO - Taxes and fees, high tax burden, contributions that are no longer provisional and have become permanent. What can be done to change this troubled economic-tax scenario? To answer this question, the economist and tax expert Eduardo Fleury will hold, next Monday, at the Hotel Caesar Park, in São Paulo, the seminar What is the tax reform that Brazil needs?

For Fleury, Brazil needs many reforms. “In fact, you can't choose which renovation comes first. What the order of reforms tells us is the political viability of each one. If we are going to hope to change the political system and only then do the tax reform, we will have to wait a long time ”, he says.

JB Online - Does Brazil urgently need tax reform before political reform?

Eduardo Fleury - As for reforms, we can say that we need many. In fact, you can't choose which makeover comes first. What the order of reforms tells us is the political viability of each one. If we are going to hope to change the political system and only then do tax reform, we will have to wait a long time. I understand that tax reform does not need to be carried out in large packages. We can do the reform in parts. For example, one of the major problems that companies face on a daily basis is the administrative cost of “paying” taxes: we spend an average of 2.600 hours per year, compared to an average of 183 hours in OECD countries. Streamlining the collection of taxes would already be a great improvement for companies. On the other hand, clearer rules have already reduced the climate of tax uncertainty surrounding companies that want to invest in the country. A part of the reform that is quite important and that would simplify the system is the creation of VAT that should replace the following taxes: PIS, COFINS, ICMS, IPI and ISS. We would reduce the number of laws, bureaucracy and the fiscal war, all at the same time. However, this change is very complicated from a political point of view, as States and Municipalities would lose the power to legislate on their taxes. In addition, the big obstacle would be how to distribute the collection of this VAT. Therefore, we can say that the complete tax reform is a very complex task, mainly from a political point of view.

JB Online - The country has one of the highest tax burdens in the world, in addition to contributions that are no longer provisional and have become permanent. What to do to change this sad scenario?

Eduardo Fleury - Our tax burden is very high, forecast for this year is 36%, according to the new calculation, but I think we should separate things a little. We have a tax reform to make the tax system more rational and less harm to private initiative. Another thing is to reduce the tax burden, which I believe is necessary as well. However, this last point must be treated from a fiscal point of view, that is, expenses and revenues. I understand that we should have a gradual program to reduce the tax burden by eliminating certain taxes and reducing rates. I think this gradual reduction would make governments (federal, state and municipal) more efficient in their spending.

JB Online - Would the single tax, combined with better government management and public spending, be the way out?

Eduardo Fleury - I believe that the single tax is not the solution, a better system would be the reduction in the amount of taxes. We have 50 or so taxes, the first task is to reduce this number to around 10 taxes and contributions.