Author: Abnor Gondim

Source: DCI - São Paulo / SP - OPINION - 21/06/2010

BRASÍLIA - Former Secretary of Finance of Paraná, with 25 years dedicated to studies and debates on the theme, federal deputy Luiz Carlos Hauly (PSDB-PR) radicalizes when the subject is tax reform. It wants to exchange the range of taxes for the so-called selective tax, which would only apply to 12 products, such as energy, communications, fuels, cigarettes, beverages.

Today, according to him, Paraná has the best tax system in the country. Inspired by his ideas, then-governor Roberto Requião (PMDB) decided to decrease the ICMS on 95 thousand products and increased it by only three items. Thus, the state managed to go through the year of the crisis (2009) as a stable collection.

"We tax consumption in Brazil, which affects the poorest families in the country. This distorted it, because it charged taxes on companies," he said, in an exclusive interview with DCI. "We need to carry out a radical tax reform", he amended.

With five terms, he is one of the six parliamentarians mentioned 17 years ago in the list of “Heads of Congress”, drawn up annually by the Inter-Union Department of Parliamentary Advisory (Diap).

Check out the interview.

Why do you defend the end of the tax incentive?

Because you need to have a paradigm shift. This year alone, tax incentives from the Federal Revenue are totaling R $ 111 billion. It is an expressive amount. In addition, the way the incentive is made in the country ends up distorting the market economy, price formation, competitiveness and competition. Some have it all. Others, nothing. But we also created exceptional structures, like Simples and Supersimples [the Simples Nacional]. We also created a special tax payment regime with high subsidies for micro and small companies.

But, deputy, in general, businessmen praise tax incentives, because that is the only way they are encouraged to invest.

Sorry, the tax proposal that I defend and have developed for many years does not provide any tax for the company. There can be no tax incentive if there is no tax. In my modeling, there is only Income Tax on profit. It is almost the North American model, which has the tribute only in the final sale. But, in our proposal, neither has that. The tax modeling that we developed is based on the Income Tax / single-phase selective tax / financial transaction tax tripod. In this structure, you practically eliminate all other consumption taxes. In addition to the Brazilian tax system being anarchic, chaotic, a real asylum, there is an inequality: we tax consumption, which affects the poorest families. This charged taxes on companies. Any country in the world does not have half the tax burden that Brazil has on consumption. This goes on top of industry, commerce and services. For this reason, one of the points that contribute to the country not being competitive in relation mainly to products from China is the distortion of our tax system. 98% of companies are micro and small companies, a large part of which have access to Super Simples. But even with a reduced load, you are not competitive.

Would only the Income Tax remain?

No, no, the State has an ICMS substitute. For example, in São Paulo, the entire state tax collection can be concentrated on ten products. The entire tax burden can allocate a maximum of 10 or 12 items in the economy. It is the selective tax. It replaces the taxation of all others. It would be only in energy, fuel, communication, cigarettes, vehicles, electronics, appliances, tires, auto parts. If you want, you can put steel and cement and clothes threads. It is at the origin. It is selective single-phase tax. To replace the employer social security tax, I would introduce the financial transaction tax. And, to replace the rest of the burden, I would add the income tax base. You would eliminate these perverse taxes that destroy price formation, the market economy, competitiveness, competition, which ends up causing, according to Fipe and Ipea, a family of two minimum wages to pay 53% of the tax burden, while a family with more than 30 salaries pays 29% taxes. It is wicked and inhuman.

Two years ago the then governor of Paraná, Roberto Requião, showed interest in adopting some of his ideas. Did it go ahead?

He adopted a part as far as the legislation allowed. He reduced the ICMS [Tax on Circulation of Goods and Services] from 18% to 12% for 95 thousand products. Some for 7%. As a result, he made a small load reallocation in energy, fuel and communications, which increased by 2%. And then employability increased, tax collection was maintained, state companies were strengthened. It was a success. He went through 2009 - which was the year of the crisis - keeping the collection at the same level. You already have a consolidated experience of one and a half years. There was a reduction in taxes, but the entrepreneur does not always pass on to the consumer a reduction in the price of products. The government says, for example, that after the end of the CPMF, no businessmen decreased a penny in their products. In fact, President Lula himself complained about this once. Whoever says that is a liar. It is an intellectual falsehood because the government transferred the CPMF to the IOF (Tax on Financial Operations). I call President Lula a liar and his minister, because he relocated the cargo, took it out of the CMPF and passed it on to the IOF and other feds. When they lost the CPMF, they taxed other activities. President Lula has no obligation to know the details, but they have not lost any revenue due to the loss of the CPMF.

But do you argue that, with the tax reduction, there is an increase in consumption and collection?

You end up increasing consumption because you end up having availability. But not everyone increases consumption. Another pays the bill. The move was a 6% reduction in ICMS on 95 thousand products and a 2% increase in the three items that most concentrate the collection. But my proposal is to totally eliminate the ICMS on these products, which would have a very big impact. But he [Requião] did well. Today Paraná has the best model of ICMS in the country. Last week, during a debate on the improvement of the General Law on Micro and Small Companies, I defended the thesis of also zeroing the ICMS and ISS of every micro and small company, with relocation, using the same methodology. Of the 3,7 million companies registered in Super Simples, to reset the ICMS and ISS, you need to increase 2% in energy and communication. My proposal is not to tax ICMS, but to tax financial transactions.

Paraná also stands out as one of the states that has the highest ICMS exemption rate for micro and small companies?

Up to R $ 360 thousand in annual revenue, ICMS is not paid. Up to R $ 2,4 million, all bands have tax reduction incentives.

You defend a tax reform, but everyone defends it and it never comes out, as it happened this year with the proposal by Deputy Sandro Mabel.

But it is better not to walk there. The improvement is marginal, very small. We have to do radical tax reform. You have to adopt an intelligent model, like that of the United States or that of the European Union or a mixture. There is no point in mending this imperfect model.

To the DCI, deputy Luiz Carlos Hauly (PSDB-PR) defends the exchange of the range of taxes by the so-called selective tax, which would apply, for example, to items such as energy, communications, fuels and beverages.