Struggle for ethics
Source: Forbes Magazine - 27/06/04
By MARCELO DE VALÉCIO
The president of the Brazilian Institute of Ethics in Competition (Etco), Emerson Kapaz, 49, was at the forefront of important forums for the debate on ethics and citizenship. In the 80s, he founded with a group of young entrepreneurs the National Thinking of Business Bases (PNBE), which aimed to create a politically and socially conscious business representation system. He also participated in the creation of the Abrinq Foundation and the Ethos Institute.
Paulistano, retired and father of three children, Kapaz is a civil engineer, with a postgraduate degree in Business Administration from FGV-SP. He started his career as an entrepreneur at Elka Plásticos, a toy company founded by his father. Soon he became president of the São Paulo toy industry union. He also worked at Fiesp, in which he lost the race for the presidency, in 1992. He was Secretary of Science and Technology of the Mario Covas government and later a federal deputy. In this interview, Forbes Brazil, highlights how much the country will gain if it wins the war against informality.
As a sportsman, the businessman has his favorite leisure race and is training for the Buenos Aires half marathon in September. He already ran the one in Rio de Janeiro last year. Trains at USP or Ibirapuera three to five times a week. He recently discovered photography as a hobby.
Does the country need a business ethics shock?
Parallel Brazil is scary. A harmful environment of generalized civil disobedience was created. Nearly 60% of employees do not have a formal record and 40% of the country's gross income is in the informal economy. According to a study by FGV with 50 thousand small companies, only 15% pay taxes. In the agricultural sector, the situation is more serious, the level of informality reaches 90%. We estimate that in civil construction about 80% are informal. In retail, you can count on completely regular companies on their fingers. Informality creates a cornered businessman, hostage to the system. It is necessary to break this cycle. If nothing is done, in a year we will have up to 50% of companies in the informal sector.
What is the effect of these numbers on the Brazilian economy?
The federal government, states and municipalities lose more than US $ 50 billion in revenue per year from smuggling, evasion and counterfeiting. This represents 33% of the total we collect in taxes. Not to mention the country's image. South America has the highest average of informality in the world and Brazil is 40% above the average of the continent. The informal economy has only one third of the productivity of the formal sector. In addition, it does not have access to finance, it only does business with other informal firms and it does not have room to grow, as it grows, awakens the attention of the inspection. Brazil does not grow sustainably in this way. Which investor will invest resources in a scenario like this?
What are the causes of informality?
The tax question is the central point of the question. The government raises taxes because the tax collection falls with the increase of informality, which is growing again because companies cannot pay and compete with informal ones. Then we entered a vicious vicious circle. Many publicly traded companies went public, for fear of showing their balance sheets. Other factors are the exaggerated bureaucracy to open and close a firm, the inflexible labor legislation, the insufficient working conditions of the various tax collection and inspection bodies and the slowness of the courts.
Piracy and smuggling are problems that need to be tackled, but which in some cases come up against social issues, such as street vendors. How do you assess the issue?
It is necessary to demystify the idea that the informal economy is a street vendor problem. It is something branched out in different sectors of society, in which corrupt judges, politicians and businessmen fit. The web needs to be undone as long as possible. At the same time, it has to expand the punishment, because the slowness of justice encourages illegality. We cannot turn our backs on these problems and think that it is so. We need to be indignant. It's like the favela, which grew, everyone thought it was normal. Because she became the birthplace of drugs. Likewise, informality is the nursery of corruption. Where the State is not present, it is a fertile ground for organized crime to act. Smuggler Law Kin Chong's arrest is an example of good work, but it is only the tip of the iceberg. Brazil accounts for 10% of world piracy. The Lobão (Roberto Eleutério da Silva, sentenced to 22 years for smuggling) has 11 cigarette factories and 300 trucks in Paraguay to bring counterfeit products to Brazil. About $ 10 billion of contraband entering Brazil comes from Paraguay, which is the world center for the distribution of counterfeit goods. The neighboring country is unable to solve the problem alone, despite the efforts made by its government. Brazil needs to support it, including financially. But the problem of illegality is not just smuggling. The injunctions against the charge of Cide and the ICMS and the addition of solvent or alcohol in gasoline, besides harming the consumer, cause a leak in the fuel sector.
What solutions do you suggest for the informal market to lose steam?
It is necessary to attract sectors that are outside the economy. To reward with the reduction of bureaucracy and payroll taxes and to adopt measures that make the Judiciary more agile and prepared to ensure intellectual and industrial property rights. Another alternative would be to create a Simple Giant. This collection system is great, there is no company that wants to leave it. There is no point in importing models from other countries, the Brazilian wants an easy, simple and fast system, otherwise it does not work. We cannot have more than four or five big taxes. The government needs to understand that it is possible to reduce taxes without losing revenue. São Paulo succeeded. The tax burden on the alcohol chain decreased from 25% to 12% and even so, tax revenue rose 7%. Political will is needed. There are 50 ICMS rates in the country. Each state has a policy for this tax. In addition, the government needs to give concrete signs that combating illegality is a priority. Create a national program administered by an interministerial committee, coordinated by the Casa Civil or the Fazenda.
What practical results can reducing informality bring to the country?
If informality falls 1% per year, GDP per capita grows 7% in the same period, reversing the trend of the last decade. Over the past 20 years, average GDP growth per capita has been 0,5% per year. If GDP grows below 2,1%, GDP per capita is zero. The drop in the population's income culminated in a decrease in consumption and an increase in violence in cities. When informality loses strength, the number of jobs, revenue and public investments grow. The economy as a whole is stimulated and organized crime loses strength.
How do you assess the ethical issue in the corporate field?
It is not possible to live in a society in which ethics is not a priority. Companies know that if they are careless with social issues and the environment, they will have problems in the market. The challenge is conscious consumption. People have to be responsible for natural resources and the consumption of industrialized products, energy, fuels. The American pattern of consumption is a problem today. If all countries reached the same level, there would need to be three Earth planets to cope.
Article: The precariousness of the rule of law
Stability and clarity are minimum requirements for law enforcement. This is not what you see in Brazil. Standards are changed frequently, often with deplorable technical quality. The interpretation given to the norms also changes continuously, without plausible justification.