Author: Marcos Cintra

Source: Daily Reporter - SP - 19/10/2009

One of the most relevant points in the book Bank transactions: pathway to the SingleTax ideal, which I published in the United States in July of this year, refers to the impact on the prices of 110 products if a tax reform was promoted in Brazil that would extinguish the collection taxes and to replace them, a Single Tax on Transaction (IUT) was levied on bank current accounts.

The book shows that for the Union, States, Federal District and municipalities to collect 27% of GDP, which is equivalent to the revenue from taxes that would be extinguished, and considering the volume of transactions in the economy, the IUT rate should be 2,81, XNUMX%, charged to the debit and credit of each transaction in bank current accounts.

The comparison between an IUT with a 2,81% rate and a traditional model with the ICMS, IPI, ISS and employer's INSS shows that in the first case the impact of taxes on sector prices would be at least 9,87%, on services real estate and rent, and a maximum of 20,35%, on gasoline. In the case of the four conventional taxes, the effect would range from 21,07%, in real estate and rental services, to 58,49%, in tobacco products. In other words, the financial transaction tax model would imply a sharp drop in the sectorial tax burden, with beneficial effects on prices. The average reduction would be of the order of 50,5%, with the smallest decrease in public services (-33,2%) and the largest in medical, hospital, measurement and optical devices (-68,4%).

The 2,81% rate for the IUT was estimated to replace taxes that would be eliminated in the world of the Single Tax, and whose global collection amount is currently equivalent to 27% of GDP. However, the four taxes considered in the simulation (ICMS, IPI, ISS and employer's INSS) collect only 10,86% of GDP. To make the comparison more precise, the financial transaction tax should have a rate of only 1,13% on each side of the transactions to generate equivalent collection. In this way, the minimum sector tax burden would fall to 4,01% (real estate and rental services) and the maximum would decrease to 8,62% (gasoline). The reduction in the tax burden at the rate of 1,13% would be, on average, 79,5%, with the smallest drop being 71,9% (public services) and the largest drop being 87,1% (medical and hospital devices, measurement and optical).

All the simulations presented in the book (there are five cases) show that, with the IUT replacing traditional taxes, there would be a strong reduction in the sector's tax burden without the government losing revenue. The compatibility of these apparently contradictory results is found in the expansion of the universe of taxpayers, made possible by the taxation of financial transactions.

The study presented in the book I published, and which should have a new edition launched in Brazil soon, shows that the IUT represents a tax relief for the national productive sector and allows the increase in the purchasing power of the Brazilian. It is the tax reform project that companies need and that consumers want.

Marcos Cintra holds a PhD in Economics from Harvard University (USA), full professor and vice president of Fundação Getulio Vargas.