Author: Gilmara Santos and Laura Ignacio

Source: Gazeta Mercantil, 27/09/2007

São Paulo, September 27, 2007 - To meet the requirements, the company has increased its tax department by 30% over the past three years. A study by the firm Martinelli Advocacia Empresarial reveals that in the first nine months of this year alone, the federal government has already issued around 250 new tax rules, not counting the declaratory acts.

'The changes were mainly in accessory obligations and information that companies must provide to the Tax Authorities', explains consultant Denilson Utpadel, from Martinelli. 'Adaptation and updating have a significant impact on companies,' adds the consultant. In the case of Hering, explains the controllership manager, Marciel Costa, in the last three years the company has had to increase by 30% the number of employees working to meet the new tax requirements and responsibilities attributed to legal entities.

"Companies are obliged to support another tax burden, in addition to the normal burden, which is that of ancillary obligations", comments the executive.

"The government's obligation is to inspect, but as the work is complex, it ends up attributing this responsibility to the taxpayer and this raises the cost of companies," says Marciel Costa.

It is estimated that large companies will have to deliver more than 200 Darfs per month. And the forecast is that employees who work to take care of the fiscal and tax part represent about 30% of the payroll of these companies, according to information from professor Fábio Pereira Ribeiro, from the Centro Universitário Monte Serrat (Unimonte). Spending, however, is not restricted to payroll. 'It is difficult to establish what the cost is because, in addition to the employees, there is also the cost with the systems and equipment to meet this demand', comments Marciel Costa.

Denilson Utpadel comments that, with so many changes, companies' demand for tax consultancy also increases. 'Before, there was talk of tax planning, today it is important to have a tax consultancy to advise the company in the face of so many changes', comments the consultant.

Upon receiving information about the Martinelli survey, the vice president of the national Bar Association of Brazil (OAB), Vladimir Rossi Lourenço, was not surprised. For Lourenço, the solution to this 'excessive' number of rules is to simplify the tax system. 'We need effective tax reform. Not patching as it has been done until now ', he criticizes. The lawyer explains that so many rules make understanding difficult, making it difficult for the taxpayer to claim rights or even collect taxes.

In October 2006, the Brazilian Institute of Tax Planning (IBPT) reached the number of 3,5 million rules issued since the promulgation of the 1988 Federal Constitution. Of these, 141.771 are federal. As for tax rules, 26.104 federal rules were issued in that period, with 4 rules per day being accounted for.

For the president of IBPT, Gilberto Luiz do Amaral, the biggest problem in the Brazilian tax system is bureaucracy. "All this complexity makes the taxpayer a slave to the tax authorities because he does not know which rule to follow," he says. Amaral also criticizes the volume of ancillary obligations, 'demanding that taxpayers dedicate time and money to play the role of inspectors'.

Gazeta Mercantil / Caderno A - Page 14