Source: Folha de S. Paulo - SP - DINHEIRO - 15/11/2009

LOCAL REPORTING

In addition to not passing on discounts to consumers, the margin of pharmacies is not being fully taxed. Recently alerted by Etco (Brazilian Institute of Ethics in Competition), the São Paulo State Finance Department, which taxes the sector based on a smaller margin, decided to change the ICMS calculation mechanism.

The sector is taxed by the tax substitution system, in which one member of the chain - in this case, the laboratories - collects for the others. Due to the discounts granted at the factories, the increase in revenue expected with the tax substitution ended up being below expectations. This does not mean that there is tax evasion on the part of pharmacies, but that the index used to calculate the tax collects less than necessary.

The government decided to adopt tax substitution to curb tax evasion after a study by the McKinsey consultancy, carried out in 2005, revealed that almost 30% of the sector's revenue was either not taxed or had some other type of irregularity.
The Treasury's intention was to raise the tax calculation index (value added multiplier) from 38% to 68%. Dissatisfied with the increase, the private sector ordered new research from Fipe / USP in order to establish the most appropriate index. The study should have been delivered in October, but it is not yet ready. "We are waiting," said secretary Mauro Ricardo Costa. "We need to know at the point of sale the real price that is being practiced in order not to commit injustices."

According to people who had access to preliminary data, the study must show that, to correctly tax the retail contribution margin, it will be necessary to apply an even higher index, of 260%. “There are people in the sector who regretted ordering the study, who think they should have settled for 68%”, says an executive in the sector.
The State of São Paulo concentrates 80% of the production of medicines. (MB)