Not even a small business escapes a squeeze


Source: DCI, 01/10/2007

Preceded by great fanfare and presented by the government as “the salvation of the crop”, the new Simples - better known as Supersimples or Simples Nacional - brought, in fact, embedded in the legal and juridical intricacies of the text that instituted it, substantial increase of the load taxation for the vast majority of the universe of micro and small Brazilian companies.

In some cases, such as in the service sector and in some industrial segments, the increase reached over 100%.

In other words, the government took advantage of the opportunity to extend the benefits of the good old Simples to squeeze the productive sector a little further.

Simples was created in 1996. The sectors that could fit into this program (professionals and activities regulated by law were excluded from it) cannot complain about the lack of support.

But now, transferred to Simples Nacional, they will pay, with interest and monetary correction, the benefits they enjoyed during the period 1996-2006.

The government is like this: it gives alms in one way and collects forced donations in another. It has a pen to create laws, Congress to pass them, a legal apparatus to ensure compliance and a police force to suppress any resistance. But what about society? How does it react to the continued fiscal crunch? In the 1990s, for example, large companies, which could hire good tax attorneys, gained in court the right to recover some overpaid or unduly paid taxes. Others, of smaller size, had to choose between closing or evading.

The issue was addressed by the newspaper O Estado de S. Paulo, in its edition of 9 September last, in the Economics and Business section. The title “Tax evasion already ties with the tax burden” says it all.

Projection made by the professor of Public Finance at USP, André Franco Montoro Filho, cited in the report, shows that, for a tax burden of 35% of GDP, tax evasion is 30%.

If, suddenly, as if by magic, Montoro Filho imagines, “the country would end tax evasion, the tax burden could rise and, in spite of that, it would be possible to reduce the rates of all taxes”.

With that, he concludes, “we would have the best of all worlds: the tax authorities would raise more and everyone would pay less”.

According to data from the São Paulo State Finance Department, cited in the report, the retail trade withholds, on average, 60% of what it sells.

“It's R $ 3,5 billion per year”, in the accounts of secretary Mauro Ricardo Costa. The São Paulo secretary and the former governor of Rio Grande do Sul, Germano Rigotto, another respected specialist in taxation, defend the establishment of a ceiling for the tax burden in relation to GDP.

Mauro Ricardo Costa says that when a certain limit was reached, automatically, tax and contribution rates would be reduced, easing the individual tax burden.

For his part, Germano Rigotto sets the ceiling at 30% of GDP. In order to compensate for any loss of revenue, he proposes the creation of two IVAs (Value Added Tax): a federal and a state tax.

The current and high level of tax burden (37,8% of GDP) should grow even more for the productive sector, this year and the next, when Simples Nacional is fully implemented, and with companies excluded from it, which will pass on to others systems for calculating and collecting taxes, fees and contributions.

Failing to pay tax on 60% of sales, in the case of retail trade in São Paulo, is no longer evading. It is civil disobedience. And that happens in the richest state in the country.

And the situation will worsen with the approval of the CPMF, which affects everyone, and cumulatively. A nonsense!

The Government and businessmen need to understand each other, frankly and quickly, on this topic.

Supersimples actually brought a substantial increase in the tax burden to the vast majority of companies.