Institute wants equal conditions

By ETCO
17/02/2005

Source: O Liberal, 17/02/2005

Emerson Kapaz, executive president of ETCORita Soares (From Panel Editoria) - Every minute and three seconds, formal Brazil sees about R $ 12,4 thousand running down the drain. Enough money, for example, to build a popular home. The data are from the Brazilian Institute of Ethics in Competition (ETCO) formed by companies in the beverage, fuel and cigarette sectors. ETCO's missions are to guarantee a level playing field between companies, to combat tax evasion, smuggling and counterfeiting of products. In addition to the sectors responsible for the creation of the Institute, the entity is now beginning to expand its scope of action by receiving support from companies in other sectors. Emerson Kapaz, executive president of ETCO, is well aware of the ways to improve the performance of companies in the social area. He was one of the founders of the Abrinq Foundation, which brings together the toy industries and combats child labor. He also helped found the Ethos Institute, which encourages companies to adopt social responsibility programs. In this interview with O LIBERAL, he talks about the cost of tax evasion for the country's economy, explains what favelization of companies is and ensures that acting within the law is a matter of survival for companies.                  


What will be ETCO's next step?


It will be the continuation of a study we carried out last year. A survey was conducted on the size of the informal economy in the country and the data are frightening. Around 40% of the economy is informal. This year, we are going to deepen the research in companies to really know what is happening.


What, in practice, is what you call the slumming of companies and how is it linked to the issue of informality?


It is a process that takes place in companies that start by not registering an employee, then evade tax and move towards a lack of total control. In the beginning, this may represent more money, but in the medium and long term, this company ends up being marginalized. He begins to undergo inspection, he becomes a victim of bribes, he cannot participate in credit programs or public competition. A marginal economy is created.


How does this favelization of companies affect the country's economy?


These companies start to compete unfairly with lower prices than those practiced by those who pay taxes. The result is that those who are regular cannot capitalize, invest, pay their workers better. The result is that the country's official income does not grow, productivity falls. The company that doesn't pay taxes doesn't have to worry about productivity because it works with ease. They bring down growth and investment.


Among the justifications of companies to evade is the country's high tax burden. What should be done in this regard?


The government needs to take the initiative to lower taxes to result in increased tax revenues. This has already been tested in São Paulo in the fuel sector, where there was a brutal tax evasion against a 25% ICMS (Tax on Circulation of Goods and Services). We did a job with the government that had the audacity to reduce this ICMS to 12% and, in doing so, made an agreement that the percentage would only be maintained if the collection increased. In the month following the reduction, tax revenues increased by 7%. In 12 months, official sales of hydrated alcohol increased 160% in São Paulo and the collection, 10%. The companies realized that it was not worth billing outside. This can be done with other sectors.


The federal government, however, seems to be against this concept of lowering taxes to collect more, so much so that last year the tax burden increased even more.


That was a mistake. The federal government will have to review this policy. There is no way to increase the collection of companies that already pay their taxes. What is charged would already be high even if we had a return compared to that of European countries. In our case, where there is almost no return, it becomes even greater. The truth is that we have a weird situation. The Brazilian state no longer fits into the country's economy. The country needs to collect 36% of GDP (Gross Domestic Product) because the government spends much more than it should spend.


Is there only room in the Institute for large companies?


No. Today we have the possibility of having medium-sized companies that can participate as a voluntary employee. Even though the company is not a member, it can participate in the forum discussions, have access to information, help in the search for solutions.


The installation of flow meters in the country's breweries began shortly before Carnival. Do you already have a result of what happened with the increase in control over production?


The measure is starting to take effect now. In some companies, the meter is still being deployed. We have no way of making an assessment now. The Getúlio Vargas Foundation is developing software that will be able to show the government, based on the volume of beverage delivered, how much the company would need to buy raw materials. This means that by table, the entire chain will be better inspected.


Will this type of technology be used in other sectors?


It can be used in the soft drink sector for example. The problem is that, in this sector, there are many more plants. Today there are 780 different brands in Brazil. Care will need to be greater.


Why did you start working for the beer sector?


Why it is easier to control and why tax evasion is very high. It is estimated that the sector will stop raising R $ 720 million per year. The volume of banknotes issued is huge because the sale is very fragmented. Electronic control will give the government the ability to monitor the sector with low investment.


Etco talks about the survival of companies and, at the same time, greater control over revenue. A lot of people must ask themselves, which side are you on, companies or government?


We are on the side of ethics and our assumption is that we must compete on equal terms. It is very difficult to see someone illicitly robbing you of the market. In illegality, it is easy to compete, anyone grows.


How do companies receive ETCO work?


They receive very well because competitive ethics is a matter of survival. This will provide the strength for companies to rise up against the heavy tax burdens, which should have already been done. Many companies accept this taxation because it no longer makes a difference if the government raises taxes because they will not pay, but then what is happening is that the government is rushing to tax sectors that cannot be escaped: energy, fuel, telephone. The government ends up collecting what the company does not pay by taxing sectors where it cannot escape.


One of the problems linked to informality is the issue of piracy. There is no denying that they are much cheaper. What is the contraindication for these products?


The first problem is the quality of the products. In addition, and more serious, is the fact that piracy is an indirect way of making organized crime profitable. Behind the distribution networks of these products there is always a magic. Piracy is not a way to serve consumers with cheaper products. It is linked to violence and crime.