Source: Diário Legislativo, 05/03/2009

The director of the Center for Administration and Tax Policy of the Organization for Economic Cooperation and Development (OECD), Jens Lundsgaard, said that Brazil is "testing the world limits" with the current tax rates. Lundsgaard said that the tax rates in Brazil are among the highest in the world, although this does not reflect in a higher tax collection - because the tax base is lower than in other countries. For him, the challenge of tax reform, in addition to simplification, is to increase the tax base, so that the rates can be reduced.

For that, he said, taxpayers need to believe that taxes are fair, which should make it more attractive to work within the formal market. "Currently, it is very complicated to administer taxes in Brazil, which are high, and to make sure that businessmen do not spend time thinking about taxes, but having ideas on how to become more competitive," he said.

The statements were made during a debate promoted by the rapporteur of the Special Tax Reform Commission, deputy Sandro Mabel (PR-GO).

Examples

OECD technicians suggested that Brazil look closely at the examples of tax reform implemented by Australia and Canada. Among the 30 member countries of the organization, these are the ones that most resemble the Brazilian case, in which taxes are divided between a central government and state governments.

In the OECD, only the United States does not adopt the value added tax system, and therefore this issue was only reinforced: it would be better for the Brazilian economy to adopt a single value added tax, as is the trend worldwide. Although they stressed that no model can be exported from one country to another, Brazil can take advantage of international experiences.

In the opinion of the head of the OECD Consumption Taxation Unit, David Holmes, the Australian model would be the best. In 2000, Australia replaced state taxes with a single national system, but in which resources are collected by the government and allocated to states. In this way, Australians resolved their version of the fiscal war that exists in Brazil, in which states give incentives to compete for the installation of companies. "But I think that you will not be able to convince many governors to give up and their own coffers, and that is why this model may hinder reform in Brazil," he said.

The second best option, for Holmes, is the Canadian model. In Canada, a single federal tax has been implemented, at a rate of 5% on added value, and each province may impose additional taxes. There are two options in the sub-federal part of Canada that adopts a value added tax. In Québec province, for example, there are two tax systems, federal and local, while in other provinces the local tax is collected by the federal agency and passed directly to the local government. "The simpler the better. I guarantee that Canadian businessmen would like to unify their state charges, ”he said.

Goals

According to OECD representatives, it was difficult in almost all countries to implement a value-added charging system. This is a requirement for entry into the European Union, and therefore European countries have done so jointly, but the rest of the world is still looking for their own formulas.

The main difficulty, according to Lundsgaard, is that one cannot cut taxes overnight, because the risk that the country cannot finance itself would cause Brazil to lose confidence in international financial markets.

For him, it is necessary to improve the ICMS, which is already a value-added tax in practice, but in which credits for collection in the production chain take time to return to companies. The technicians defended the collection system at the destination, which would reach the final consumption, and not the consumption of the companies. This is the reform proposal currently advocated by the government. "No matter what a company buys, it receives credits so that the tax is not a burden," said Lundsgaard.

The head of the Cooperation Unit with Economies of Non-OECD Countries, Richard Parry said that although Brazil has worked with the organization on many occasions, the country has rarely been interested in the tax sector, and therefore the opportunity to working with the Chamber's tax reform committee was welcome. Sandro Mabel explained that he asked the OECD for the participation of some of its specialists so that the deputies could learn about the experiences that he can access on trips to France to learn about these models.