The cost of bureaucracy
Source: The State of S. Paulo - 08/07/2010
The country will not be able to follow the path of sustainable development if it is unable to overcome the bureaucratic obstacles that today face companies and citizens. Not by chance, in the index prepared by the World Bank to measure the ease of doing business, Brazil ranks 129th out of 183 countries studied in 2010. The bureaucratic cipoal not only hinders and delays the execution of companies' projects and investments, with a negative impact on its international competitiveness, as well as having social effects. Barriers to the proper functioning of the state machine mainly affect the educational and health systems, to name just two critical areas.
This was the broad view that guided the study carried out by the Fiesp Competitiveness and Technology Department on the economic costs that bureaucracy entails for the country. In estimating these costs, the entity's technicians used the nominal GDP per capita to achieve a better assessment of its weight for each Brazilian. It was concluded that, if Brazil reduced its bureaucracy index by 0,3 percentage point, reaching the level equal to the average of countries taken as a basis of comparison, would the country's per capita product increase to US $ 9.147? an increase of almost 17% in the average for the period 1990-2008. The average annual cost of bureaucracy was estimated at R $ 46,3 billion, at current prices in 2009, equivalent to 1,47% of last year's GDP.
The Fiesp study, which was based on its own surveys and analyzes by other business entities and national and international institutions, presents another impressive figure. The savings that could be obtained with a reduction in bureaucracy are equivalent to 10,1% of total private investments in 2009 and to no less than 300% of private spending on research and development (R&D).
This very high cost is, in large part, directly related to the myriad of taxes, contributions and fees that must be collected by individuals and legal entities, always subject to monetary correction in case of installments and fines for delays. As the regulations are often confusing and require a lot of attention, which can therefore generate legal uncertainty, Brazilian companies spend 2.600 hours of work annually, on average, just to pay taxes. In companies in the countries that served as a parameter, this task takes, on average, 200 hours from their employees.
One of the consequences of all this, as the entity points out, is the encouragement of informality. The lengthy and costly process of starting a company tends to favor the underground economy. In addition, the extremely heavy tax burden and the complexity of the regulations are an invitation to informality.
Fiesp presents a series of proposals for the simplification of bureaucratic practices, in particular the consolidation of procedures and regulations, to avoid redundancies and make the rules clearer. It proposes, for example, the waiver of excessive certificates and controls and the intensification of the use of electronic means. A “single window” could also be instituted, whereby taxpayers could have access to all the information necessary to fulfill their tax obligations.
These are viable recommendations and few would require changes to the legislation. The study, however, avoids explicitly mentioning the need for tax reform, which has always been postponed, and which could, however, considerably reduce bureaucracy. Be clear from the outset that we are not referring to the project that is being simmered in Congress, already diluted to serve interest groups and riddled with errors and improprieties, in the view of respected tax experts.
Effective tax reform and permanent care are essential to prevent the legislation from being changed at all times, on a case-by-case basis. Society hopes that the land of empty promises will finally be left and that this old aspiration will become reality.
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The cost of bureaucracy
Author: Ives Gandra da Silva Martins *
Source: O Estado de S. Paulo, 16/11/2007
At a recent meeting of experts, surveys conducted by Price Waterhouse & Coopers were distributed in the countries where the company has offices, demonstrating that Brazil is the country where public administration is one of the major obstacles to national growth.
In the research carried out with the World Bank, in 175 countries, Brazil is the one in which a company spends more time to fulfill its tax obligations. He is an absolute champion. An average of 2.600 hours per year is spent here, compared to 2.185 in Ukraine, 1.300 in Nigeria and 1.120 in Nigeria.
Developed countries, on the other hand, have a much lower figure: 620 hours in Spain, 522 in Mexico, 432 in the Caribbean, 325 in the United States, 135 in Denmark, 122 in Sweden, 105 in the United Kingdom and Germany, 70 in New York. Zealand and 68 in Switzerland. In Singapore it is only 30 hours and in the United Arab Emirates, 12.
These hours, which imply charges for companies, are not included in the almost 37% tax burden related to the gross domestic product (GDP), which means that the bureaucratic burden transferred to the private sector would raise this percentage well above that presented by most developed countries.
Another of the bureaucratic obstacles, inherent to the ingenuity of government officials in creating useless obligations and justifying an excessive number of public servants, is the need for the taxpayer to present a negative debt certificate for almost all the acts he practices, so that without this document, life business becomes virtually impossible.
Countries like Argentina, Australia, Canada, China, France, Germany and the USA do not have a similar requirement.
Mexico, Portugal and Spain have it, but it is easier to obtain, while in Mexico the existence of a tax debt against the company is irrelevant to its economic life.
In Brazil, such a certificate is an impressive instrument of pressure used by government officials to prevent taxpayers from discussing tax exemptions before the Judiciary, allowing them to charge what is legal and what is illegal. The examination of regularity itself takes fantastic time to be done, often providing questionable reasons for preferences, which are not far from concussion or passive corruption.
In this problem-generating machine, it is now intended to send the name of the taxpayer debtors to Serasa, so that, discouraged from discussing, they pay what the Finance believes they are entitled to, even if they do not have it.
More than that, the parity balance of the Taxpayers' Councils was destroyed, at first, removing experts from the taxpayers, with a dubious reconstitution of the councils, and, now, pretending that they are appointed, but prevented from exercising any activity in the area. . In other words, the intention is to make the Taxpayers' Council not a judging body, but a mere ratification house for tax action.
To further aggravate the reduction in the right of defense, there is a preliminary draft under study to allow the National Treasury Attorney to execute the debts without the participation of the Judiciary, taking the taxpayer's assets to auction and returning what was found - in the event that the taxpayer appeals to the Judiciary and win the case - nine or ten years later. Embargoes to enforcement will therefore not have a suspensive effect.
Finally, there is a project in Congress that aims to eliminate the taxpayer 's right to extinguish criminal punishment if he pays the tax and the fine before the complaint.
All of this is done in the light of a Constitution that, in Article 5, item LV, ensures broad administrative and judicial defense, being, in my view, all these restrictions of manifest unconstitutionality.
It happens, however, that in Brazil the public interest and the interest of those in power are confused, to the point that the federal government's labor expenses always grow above inflation.
And the President of the Republic insists on saying that to make this sclerotic machine more efficient it needs to hire more servers!
Folha de S.Paulo published a survey according to which, of the total number of hired workers without a contest by the federal government, 47% are union members and 19% are members of the PT. In other words, the friends of the king are more important in the government than those who are selected through competitive examinations, noting that the increase granted in 2007 to non-candidates was much higher than that of career officials.
I am convinced that the bureaucratic burden determines the tax burden, which can only be ensured insofar as the instruments for reducing the right of defense are ensured.
I am also convinced by the quality of our taxes, that the two major principles that govern tax law are that of legality and that of “effective illegality”, since what is illegal in state bureaus becomes “revenue” to sustain this fantastic pachydermal structure of public administration. And, more and more, the principle of “effective illegality” is more important than that of legality, since the taxpayer prefers to pay the undue to suffer the sanctions, restrictions and retaliation found in the most varied forms that limit his right of defense.
Brazil is making great strides towards becoming a fiscal republic or an authentic tax dictatorship.
* Ives Gandra da Silva Martins, professor emeritus at Mackenzie Universities, UniFMU, Unifieo, Unip, Ciee-O Estado de S. Paulo and the Army Command and Staff Schools (Eceme) and Superior de Guerra (ESG), is president of the Higher Law Council of Fecomércio and of the University Extension Center (CEU)
