The weight of taxes contributes to the informal economy


Author: Flávio Dieguez

Source: Gazeta Mercantil, 30/07/2008

São Paulo, 30th of July 2008 - The informal economy is very large in Brazil mainly because of the weight of taxes and bureaucracy. ”Only with ICMS, depending on the case, you can pay 20% or 30% of the billing”, says lawyer André Spínola, from Sebrae. That is why, he says, "it is a big problem to convince micro and small companies of the advantages for legality".

To overcome this challenge, the first step is to build attractive conditions for entrepreneurs in informality, which is what Sebrae is chasing now, says Bruno Quick, public policy manager at Sebrae. And the main difficulty in creating these conditions, he says, is that they happen at the national level, and it is not simple to make the advantages of legality perceived and evaluated by businessmen in their municipalities.

The main focus is to try to reduce the tax burden, giving micro and small entrepreneurs broader access to Supersimples, which brings together nine taxes at a single rate: CSLL, PIS, Cofins, IRPJ, IPI, employers' social security, ICMS and ISS.

According to Spínola, the target of the changes are 4 million companies and could eliminate important bottlenecks that remained even after the enactment of the General Law and the creation of Supersimples in 2006.

After completing one year last month (July), Simples Nacional already had record adhesion in relation to the extinct Simples Simples. There are 2.964.564 companies in June, about 500 thousand more than those in the previous system. Each month, an average of 20 thousand companies join the regime.

The Complementary Law Project 02/07, pending in Congress, with new adjustments to the General Law between the measures the project creates the figure of the Individual Microentrepreneur. It is intended for those with annual gross revenue of up to R $ 36 thousand. It allows the entry of new categories to Simples Nacional, regulates consortia, facilitates the closing of companies and solves problems related to ICMS. When they formalize and choose Simples Nacional, they pay only R $ 50 fixed monthly INSS and, if a service provider, another R $ 30 ISS. They are exempt from IRPJ, PIS, Cofins, CSLL and IPI.

Many adjustments are still needed. Spínola explains that, contrary to what was expected, the single tax ended up increasing, and not decreasing the tax burden of many entrepreneurs, as seen in several recent surveys. Sebrae, for example, found that, among companies opting for Supersimples, 37% are paying more than they paid before the option and 32% remained the same. Only 24% had an advantage.

The reason, according to Spínola, is that there was no adequate solution for the ICMS, which is charged by the states. This problem has now been solved by fixing the amount of R $ 57 per month for the single tax. He says the new law also greatly expands the number of professional categories authorized to use Supersimples, especially in healthcare.

The advantages, however, are real, says Quick, for a number of reasons.
First, because the illegality has a burden that can be very heavy, from the seller who has his goods seized by the police, to penalties applied for hiring employees without a formal contract, for example. "The Labor Court is there to protect the worker, yes," says Quick. "In the case of an accident at work by an informal employee, the result can devastate the life of the company". On the other hand, formality opens up the possibility of accessing financing much cheaper than the usual resources, such as overdraft, in many cases. The difference may be 10 to 1, compared to the interest rate of BNDES, the TJLP, currently just over 6% per year, while overdraft is at around 8% per month.

Another important advantage that is starting to become a reality this year, Quick recalls, is access to public policies. They offer the entrepreneur courses, consultancies and guidelines that give much more security and solidity to their businesses. ”With that, he can find new niche markets, he can train to create an innovation or find alternatives for a business that is not doing well ”.

Not to mention the possibility of participating in the vast public procurement market - a possibility opened up by recent changes in legislation. With this mechanism, the State uses its enormous purchasing power of products and services to leverage, in a form of subsidy, innovative or social companies. “It is a billion dollar market, but only formal companies can,” says Quick.

The Sebrae manager believes that a lot of progress has been made in building advantageous conditions for micro and small business owners, especially because it has become clear, in recent years, that they have benefits for the entire economy and for the public authorities. He specifically mentions the so-called “MP do Bem” and the General Law: a provisional measure approved in 2005 instituting a series of tax incentives for micro and small companies. “She demonstrated that reducing taxes increases revenue,” says Quick. It is difficult to assess now, according to him, the impact of these measures with precision. "But it is visible that there was an increase in the number of small companies in the area of ​​information technology, for example". This was due to the cheaper hardware resulting from MP do Bem.