Tax game


Author: Angelo Passos

Source: Gazeta Online, 07/11/2008

Everyone knows that Fundap is not at the front of the fiscal war. Nor could it, because it is not considered a tax-based incentive. But states that are not satisfied with the competitiveness of Espírito Santo foreign trade pretend that they do not understand this. Hence the vast history of lawsuits.

The Espírito Santo Port Activities Development Fund is not part of a tug-of-war to try to attract companies (characteristic of the fiscal war). It does not compete in an advantage game. In fact, the government of Espírito Santo does not participate in this type of auction - which should not even exist.

It is fair and necessary that Fundap be treated in the context of tax reform, but as an exception. The ideal is to stay out of the change in the ICMS collection system. That is, in Fundapian operations, the tax will continue to be charged at source. Otherwise, the system withers and disappears.

The tax reform project prepared by the Planalto Palace proposes the adoption of the destination principle in the allocation of ICMS revenue originated in interstate sales. For decades, the collection has been done at the source. The investment would have disruptive consequences on the finances of some states, including Espírito Santo. It would impose on the Espírito Santo treasury the loss of about 25% of the revenue obtained in the current system. The Treasury collected R $ 5,8 billion in 2007. Cutting a quarter would give something around R $ 1,45 billion.

The collection of ICMS at the place of consumption prevents different rates in the States from influencing decisions on the location of investments. Thus, the mechanism of feeding the fiscal war will be dismantled, facilitating the standardization of rates. This is what the Planalto Palace wants, although the alignment shows an anti-federative connotation. It seems difficult to understand that such different economic situations (such as those in São Paulo, Acre, Minas, Amapá, etc.) have to be guided by equal rules. The glaring regional inequalities deserve an in-depth study of the fiscal aspects in the federative relations of the Brazilian State.

It is not about defending the fiscal war. It is a harmful institution in the federal context. It calls for the creation of regional development instruments, but the answers do not always live up to expectations. So, it has rarely been seen in the country, over the decades of this conflict, a significant decrease in disparities between States and between municipalities. This has increased the dependence of these federal entities on the federal government, whose investment capacity is far from responding to demands. When disparities become smaller, the new picture does not reflect the benefits of the fiscal war, but rather a set of variables.

What could mitigate the situation of strong loss of tax revenue in several States, due to the reversal of the ICMS collection hand? First, time. The transition to the new framework should be as long as possible. Not less than ten years, due to the complexity of the adjustments it will trigger. The benches that represent in Congress the States affected by the government's project should unite, demanding the extension of time.

Second, to preserve, or allow the creation of, mechanisms that are not typical of the fiscal war, and that boost regional dynamics - such as Fundap.

The desirable war is one of competitiveness.

Angelo Passos, journalist and economist, writes on Fridays. E-mail: