Author: Regina Alvarez

Source: O Globo - RJ - ECONOMY - 04/10/2009

BRASILIA. "The combination of the extravagant tax burden (in relation to) GDP with the enormous inefficiency of the public sector certainly places the Brazilian State among the heaviest in the world and as one of the most important factors to delay the acceleration of our economic development". This assessment did not come from an opposition leader, but from one of President Lula's main advisers when it comes to economics. The diagnosis, by ex-minister Antonio Delfim Netto, is in the book “Brazil Post-Crisis, Agenda for the Next Decade”, organized by economists Fabio Giambiagi and Octávio de Barros.

The economists assembled a team of experts, who presented proposals capable of putting the country on the path of sustainable development, with actions over the next decade. It is not by chance that it is being launched one year before the presidential election, with an agenda for the next rulers.

Pension Reform requires leadership from the Executive In the chapter “The Fiscal Agenda”, Delfim criticizes the Brazilian state model. And he mentions, among other evidences, a study by the World Bank that evaluated five factors responsible for growth retardation, all linked directly or indirectly to the State. Brazil loses badly in performance to other emerging countries, especially to the other BRICS (Russia, China and India). The factors analyzed are tax burden, government regulation, spreads, quality of primary education and practice of hiring and firing. In a ranking of 131 countries, Brazil appears in 126th place, China in 41st place, India in 69th place and Russia in 71st place.

“The catastrophe is obvious. These are all factors linked to government action. However great our doubts regarding the measurement of the fact, it is nevertheless worrying that, while our competitors are ranked in the first half of the classification, Brazil occupies its final and, by the way, the last place in extension and effects of the taxation ”, highlights the ex-minister.

As an immediate fiscal agenda, Delfim proposes measures capable of reducing, in eight years, the public debt and the tax burden to a level of 30% of GDP. For that, the ex-minister considers that it would be necessary to limit the growth rate of primary government expenditures to half the GDP growth.

In the chapter on Social Security, written by Giambiagi, the author details the “possible reform”, considering the political difficulties and structural changes in the area. Giambiagi proposes a minimum retirement age for contribution time - today this limit exists only in the public sector - with a gradual reduction in the age difference and contribution time between men and women.

The gradual expansion of the minimum age for retirement by age and changes in the rules for rural retirement - in order to reduce gender gaps and bring them into line with the criteria of urban workers - are also part of the revenue to balance Social Security accounts, or, at the very least, avoid further imbalance.

Another proposal is to reduce the percentage of INSS pensions - today it is equivalent to 100% of the original benefit. And raise the minimum age for granting the age-based benefit of the Organic Social Assistance Law. The changes would take effect after a five-year grace period, with vested rights preserved.

“The path will be difficult. Without the clear leadership of the Executive, in the person of the President of the Republic himself, the reform proposal will hardly be able to prosper.

There is no chance that it will be approved as the result of a consensus that emerged from society or Congress ”, says Giambiagi.

The former minister and senator Francisco Dornelles (PP-RJ) and the economist José Roberto Afonso write about tax reform.

The chances of approving relevant changes in the current government are remote, due to the complexity of the issue and the clash between the entities of the Federation.

The proposal is that the reform be carried out in stages, with administrative, legal and constitutional changes, prioritizing the most urgent and which does not involve changes in the Constitution. For the authors, it is possible to do a lot to relieve exports, investments and the payroll without changing the Charter. Secondly, the chapter on the tax system of the Constitution would be redesigned