Tax evasion already tied with the tax burden

By ETCO
09/09/2007

Source: O Estado de S. Paulo, 09/09/2007

Tax evasion in the country has almost the same proportion of the tax burden. For a load that borders on 35% of the Gross Domestic Product (GDP), tax evasion is on the order of 30%. The projection is by André Franco Montoro Filho, a professor of public finance licensed at the University of São Paulo and president of the Brazilian Institute of Ethical Competition - Etco - Etco.

To reach this conclusion, he considered information from five sectors that make up the institute - fuels, tobacco, medicines, drinks and technology - and projected the data for the economy. In these sectors, tax evasion reaches 30%.


A study by the São Paulo State Finance Department confirms the exuberance of tax evasion. The survey reveals that only in São Paulo, a state that accounts for almost a third of GDP, retail trade withholds, on average, 60% of what it sells. There are about R $ 3,5 billion per year, according to the São Paulo State Finance Secretary, Mauro Ricardo Costa. The Trade Federation of the State of São Paulo does not comment on the government study, claiming that it has no research on tax evasion.


"Retail evasion leads to chain evasion", says the secretary. He argues that if the retailer does not issue an invoice when selling its products, it also does not want the wholesaler, the industry and other agents in the production chain to issue an invoice against it.


Tax consultant Clóvis Panzarini says that tax evasion is greater precisely in the most dispersed sectors, which gather a large number of establishments, such as retail trade. For him, the high individual tax burden is the reason for tax evasion. "The higher the tax rate, the higher the premium for the crime."


If the country ended tax evasion, says Montoro Filho, the tax burden could rise from 35% to 50% of GDP. With that, he argues, it would be possible to reduce tax rates by 20%, on average. Even so, the load would be 40% of GDP, higher than the current one. "Everyone would pay less tax individually and the government would raise more."


The São Paulo Finance Secretary, who implements the Nota Fiscal Paulista as of October 1 - a project to reduce tax evasion and increase the number of taxpayers based on the return, to the consumer, of part of the tax paid, provided that it requires invoice -, has an idea partially similar to that of Montoro Filho of what tax reform could be in practice.


For Costa, tax reform could begin by setting a limit on the total tax burden in relation to GDP. When this ceiling was reached, the contribution rates would start to be reduced, which would reduce the individual tax burden of the citizen. "This would not need a constitutional amendment and could be resolved through administrative decisions."