Source: Time - Economy

A change in labor law could take thousands of Brazilians out of informality. According to tax experts, labor reform would not mean removing workers' rights, but adapting the law - created in the 40s by Getúlio Vargas - to the present day.

"Today, hiring is not the best deal," says lawyer Maria Inês Murgel, a partner at Junqueira de Carvalho, Murgel e Brito Advogados e Consultores. "The burdens weigh heavily on companies and are throwing many workers into informality," he adds.

According to her, reducing taxation is an “urgent and necessary” measure and would not only have economic effects. "It would be a gigantic social action, which would include a large contingent of people on the payroll," he says.

CLR Advogados e Consultores' tax attorney, Aci Hely Coutinho, agrees. According to him, the Consolidation of Labor Laws (CLT) had an important historical role, but it is not suitable today.

Less paternalism “(The CLT) was conducive to regulating relations between bosses and employees and brought benefits to society. But today, relationships no longer need to be so paternalistic, ”he says.

For Coutinho, the ideal would be a lighter legislation, which would guarantee basic rights, but open space for negotiations between the two parties.

The professor of labor and social security law at Universidade Fumec Mércia Scarpelli de Souza says that the generation of jobs in Brazil depends on several factors, such as improving the infrastructure for the flow of production, adopting an economic policy that encourages the productive sector with credit expansion measures and quality education.

"The adaptation of tax and labor legislation to the interests of the entities involved in the employment contract, workers and employers, would also be important", he says.

For specialists, the burden of charges leads entrepreneurs to seek alternative solutions, not always legal, to reduce costs.

Employees, especially those with higher salaries, agree to work under the legal system (PJ), for example, also to suffer lower taxation on their salaries.

At the other end, less qualified workers submit to informal work because they have no alternative to enter the market. This is the case of the butler Márcio Vagner da Silva, who has been working for three years without a formal contract. During that time, he never took a vacation or received a 13th salary.

Tax consultancy costs up to 5% of revenue

In addition to being cumbersome, Brazilian tax legislation is complex. To follow the law, most companies have to have a specific structure, with specialized lawyers that cost between 1% and 5% of revenue, according to calculations by the Federation of Industries of Minas Gerais (Fiemg).

The smaller the company, the greater the weight of this structure. The construction company Mascarenhas, Barbosa and Roscoe, for example, has its own legal department and a tax consultancy to be able to comply with the requirements of the law.

“The cost is very high”, says the company's director, Luiz Alexandre Monteiro Pires. The construction company has 2.000 employees, all with a formal contract. Labor costs, as well as taxes paid in other sectors, are all passed on to the consumer.

According to Pires, budgets are 126% higher thanks to existing taxes throughout the process. If costs were lower, he believes more deals would be closed.