NON-SANA REFORM DISTORTIONS OF THE TAX MODEL

By Emerson Kapaz

Like the old Baroque cathedrals, reforms in Brazil have a date to begin, but not to end. A witness to this reality is the tax reform that will complete a decade in 2004 without yet seeing a model capable of reducing tax rates, democratizing the payment of taxes and, thus, reducing the number of those who work in illegality, making tax evasion a competitive differential.

Over a period of time, often counted in centuries, the cathedrals naturally deviated from the original design, incorporating architectural features from different eras, although in appearance they maintained harmony. This trend, keeping the proportions, reflects as a mirror what has been happening with the tax reform in the country. Every time the tax alarm sounds, announcing the prospect of deficit, the immediate alternative is to increase the amount and the number of taxes .

In a retrospective view, we will find the government of the Union giving form, among other taxes, to CPMF, with a focus on financial operations, and Cofins (Contribution to the Financing of Social Security), which is now the target of a new elevation. Provisional measure issued in October puts an end to the cumulative incidence, but in compensation the rate rises from 3% to 7,6%. The high - amazing! - is 153,3%. The immediate conclusion is that attempts are made to resolve the distortions of the tax model with amendments that do not solve existing problems. On the contrary, they only amplify conflicts and tensions by keeping the economy imprisoned in the corset of immobility.

Everyone knows that Brazil needs to grow steadily again for four to five years. When looking at the initial tax reform proposal, many analysts understand that progress has been made. In concrete terms, however, there will be an increase in the tax burden for many sectors, which will certainly have to pass it on to prices. The citizen, in turn, will also pay more taxes because the Income Tax table has not been corrected. If advances existed, they will come in the long term, around the years 2005 and 2006.

And so, we are witnessing a worrying detachment from the financial and political world in relation to the economic reality. While consumers see their income volatilize, growth is delayed and real interest rates are still at very high levels, C-Bonds are up, Brazil risk is down and praise from the international economic community. These are two parallel worlds that need to find a point of intersection. For simple reasons: politics and the financial system cannot, under any circumstances, operate autonomously. Therefore, it is imperative to approach, rather than distancing, from the daily lives of businesses and people.

There is unanimity on the need to resume public investments, encourage private capital, create a consistent relationship between the share of taxes in relation to the domestic product and the collection. All of this is directly associated with the balance between public sector spending and the collection capacity. Civil society, the business community at the forefront, has sought to show that the search for balance must come from cutting costs combined with extensive administrative reform and not merely from raising taxes. If taxes become high, the natural consequence is to encourage unethical competition.

The current situation is heir to the economic miracle of the first half of the 70s. That was when the escalation of taxes to cover public spending began. Since then, what has been seen is a new version of the outpouring of colonial times. A time when English products were recorded at 60% of the value, but reached the markets of the Northeast and Rio de Janeiro without paying a penny to the crown. It is a lesson in history that should not be forgotten, but evaluated in its multiple angles to better illuminate the alternatives and evils of the present. However, there are positive news nowadays. One of them comes from the initiative of the government of São Paulo, which, in a pioneering gesture, reduced the ICMS alcohol tax rates from 25% to 12%.

It is a severe blow to the illegal trade in the product, which withholds R $ 1,5 billion nationwide. Important detail: São Paulo's losses totaled R $ 1 billion. They will certainly retreat. Why? The crime failed to compensate. In parallel, the São Paulo government has reduced the rates of more than two hundred products.

Faced with initiatives like these, it is advisable to believe that sooner or later the principle of reality will assert itself, oriented towards an undertaking that can no longer be postponed: the demolition of amendments - better to say patches - that, due to precariousness, only harm the tax system and make the financial system increasingly foreign if the theme is financing the resumption of development.

In other words, the amendments have always been worse than the sonnets. The question remains: if so, why not write the sonnets - read the reforms - and abolish, definitively, the habit of making amendments that solve nothing, which will soon be replaced by others, and more, and more in an unstoppable process of disruption of economic relations?

Article published in the newspaper O Estado de S. Paulo - 13.01.2004/XNUMX/XNUMX