Author: Abnor Gondim

Source: DCI - SP - POLICY - 08/10/2009

BRASILIA - The National Confederation of Industry (CNI) should conclude in two months a survey on how many micro and small companies are being harmed by states that are expanding the list of products included in the tax substitution system. It is an advance charge in the industry and without a reduced rate in retail in relation to the Tax on Circulation of Goods and Services (ICMS).

This fiscal setback for micro and small companies will be discussed in November, at the next meeting of the Simples Nacional Management Committee, the new reduced tax system for the segment, in force since July 2007. It is unified and bureaucratized to collect six taxes federal (IR, IPI, CSLL, PIS, Cofins and social security contribution), a state (ICMS) and a municipal (ISS).

The survey was determined by the president of the CNI, federal deputy Armando Monteiro Neto (PTB-PE), who is concerned that the tax substitution is hurting mainly the sector and retail micro and small companies.

"When opting for tax substitution, the collecting entity facilitates the collection of the tax, but cancels the benefits ensured by Simples Nacional," said the executive manager of Research, Evaluation and Development at CNI, Renato Fonseca. He is also responsible for the entity's micro and small business area.

The CNI survey will focus on tax substitution to find out the number of companies and which sectors are being most affected. "Tax substitution was concentrated on cigarettes and beverages, but it started to grow a lot for other products, and then the red light came on," said Fonseca.

According to him, the problem exists because, when the General Micro and Small Business Law was enacted in December 2006, it created the Simples Nacional or Supersimples and revoked the state Simpless that existed at the time with the reduction of the ICMS rates for the segment .

As a result, explains Fonseca, a good part of the states did not reissue the benefits that previously favored micro and small companies. Several states had Simples Simples that established lower ICMS rates for the segment.

The CNI director mentioned that the most serious cases of expansion of tax substitution occur in São Paulo. “It is difficult for national legislation to be adopted in 27 state tax laws. It takes a greater impetus from the governors to enforce the treatment guaranteed to micro and small companies ensured by the General Law ”, recommends the CNI manager.

In the federal government, the Minister of Finance, Guido Mantega, has criticized the states that carried out tax substitution at a time when the government reduced the Tax on Industrialized Products (IPI) for white goods and automobiles.

According to the minister, it was for this reason that the reduction in the prices of products for the consumer did not occur in the same proportion as the reduction in the IPI, which was 5% to 10%, in the case of household appliances.

The president of the Brazilian Micro and Small Business Support Service (Sebrae), Paulo Okamotto, also criticized the tax substitution. "It is absurd, in terms of development policy, to force micro and small companies, which have credit and working capital difficulties, to anticipate tax at risk on behalf of the state."

The State Secretary of Finance of São Paulo, Mauro Ricardo Machado Costa, is a representative of the states in the Management Committee of Simples Nacional. The DCI requested a position on the complaint made by CNI. Until the closing of this edition, there was no answer.

"We will discuss the matter, because it requires a change in the law," said the Secretary of Finance of Maranhão, Cláudio Trinchão, the second representative of the state tax authorities in the Management Committee of Simples Nacional. “There is a lot of folklore surrounding tax substitution, but for normal [medium and large] companies, there is no increase in the tax burden.” Trinchão also stated that many taxpayers applaud the measure as an instrument of fiscal balance for preventing the use of "orange" companies and unfair and illegal competition in the market.

In Maranhão, he said, tax substitution is used only in 20 products, according to a list agreed with the National Council for Farm Policy (Confaz), which brings together the state finance secretaries.