Source: Mastersaf - NEWS - 24/06/2010

This June, the tax substitution (ST) regime - which, through Decree 54.338 / 2009, provides for the early retention of ICMS for electronic products in the State of São Paulo - completes one year in force in the country. “The substitution tax is a model that transfers tax collection to the beginning of the chain. This is the big difference ”, explains Luis Carlos Massoco, lawyer specialized in consumer and business law. Thus, the manufacturer, distributor, importer or retailer is responsible for collecting the tax in the first act of purchase and sale. “You have no choice. The reseller and the wholesaler already receive the product with the built-in tax ”.

The tax model, which has been applied for some years to segments such as beverages, cigarettes and oil, implies complex calculations and has changed the routine of electronic product distributors. “It caused systemic changes because it changes the entire tax dynamics. Before, the concern was to highlight the tax, but who paid was the next in line. The state now allocates a hypothetical profit margin that is highly debatable. The government imagines the 37% margin, which is not true. In other words, the tax is collected in advance, on a presumed calculation basis and not at the actual sale price ”, explains Massoco.

According to the lawyer, it has been very difficult for companies to adapt to the entry of ST, which made about 25% more expensive at the end, because, in addition to distributors having to invest in systems, they had to study taxation, not to mention that there are different rates for each state. Thus, if there is a higher or lower rate from one state to another, the difference will be collected at the border.

The biggest challenge, according to Massoco, is the understanding of the regime by the entire chain. “Often, the reseller is not able to perceive the complexity of this act and there is a lot of fiscal problem being generated by error, which causes some tax penalty due to incorrect collection. The challenge is to align the three levels (manufacturer, distributor and reseller) to have a correct collection ”.

And do companies take advantage of this? The lawyer is clear: none. “In fact, the only beneficiary is the tax authorities, because by transferring the tip, he only inspects the manufacturer. The intermediary and the end user have no advantage. The State's argument is that, as tax evasion became difficult, there will be a market balance, since everyone will have to issue a note. For all of this to work, the ideal would be for the whole of Brazil to use the same system, but this involves the political component of fiscal war ”, he stresses.

How the distributors stayed in this story The implementation of the tax substitution regime affected the daily lives of distribution players, as they had to dedicate employees only to the regime, invest in systems and also train the entire sales team. Some felt more, others less. Carlos Tirich, commercial director of Grupo Alcateia, says that when the change happened in São Paulo last June and in Rio de Janeiro in October, the first difficulty was understanding the rules. This ended up making the company register less business for a month, until it was able to work properly on the system.

“After that period, the market has already adapted and, especially in the last six months, it no longer interferes with the distributor's income”, believes Tirich. “We are easy because we have two logistics centers, one in Rio and another in São Paulo, and according to the competitive advantage of selling in a given region, we bill by one state or the other. But the past was troubled ”, he comments.

The lack of information about the new regime also affected the channels. Tirich comments that when the tax substitution became effective, the resellers quoted in São Paulo and Paraná (a state that does not have this taxation model) and did not know what tax substitution was. “After three months of implementation, they thought that São Paulo was expensive, but then they realized that there are more taxes. Today, resellers are already well informed and the market, if it has not reached the normal level of competitiveness, is very close to that ”, he points out. The executive points out that, among the states that adopted the regime, São Paulo is the most rigid “Some states that applied the standard have already done so considering that the distributor is the substitute. That is, you enter without tax substitution and place it if you are going to sell in the state. If you are going to sell abroad, use the credit and debit model, as is the case in Rio Grande do Sul. This is a trend in all states, except São Paulo, because it is the biggest collector and it is where the service sector has a lot of relevance ” says Tirich.

Despite all the changes, the director is optimistic about the new regime. According to him, this forces the chain to work legally because the tax is paid. When it is sold for resale, the tax has already been levied in the industry, for example, and then there is no more to avoid. “Tax substitution is a good initiative that improves the market, but it might have to happen otherwise. In the medium term, it should bring good results ”.

At SND, tax substitution was not a novelty since, since 1998, the software media sold by the company were based on this model. Even so, inclusion for all products required adaptations. José Machado Bublitz, executive director of the distributor, estimates that the company had an increase of between 15% and 20% in expenses, mainly due to people dedicated to the new regime. Today, there are IT and accounting employees dedicated full time to tax substitution.

Bublitz says that, in the eyes of the tax attorney, the regime is an advance in terms of revenue, but it generates several "side effects". According to him, there are three main difficulties brought by ST. One is that the company needs to look at all the states in which it operates. Another point is the credit generated, which ends up not returning to the company because of the bureaucracy. The third difficulty is that, in corporate sales, the impact is greater, since the margins are not equivalent to the VAT (Value Added Tax) established. ”For the distributor that serves the whole of Brazil, it is insane to follow the legislation of all States. In Mato Grosso, for example, there is VAT differentiation according to the type of company, it is very complicated ”, points out the executive. "The ideal would be to have a single VAT for the whole country, even if it was divided by regions".

For him, the worst of all effects is that the company has to collect twice. “Today, 45% of our sales are to São Paulo. In other words, of the 100% that I collect from ST, 55% need to ask back to the government, because the sale of São Paulo to other states pays in SP at the entrance and if it sells to another that has an agreement is normal debit-credit. What was collected in SP becomes a credit that, in order to get it back, it is necessary to ask the government. It is very complicated. To get an idea, there is an ordinance, which is a book, just about that ”.

A factor that also contributed to make it difficult for companies to understand the new rules was the last minute notice. According to the executive director of SND, the distributors learned of ST a month before its entry. “Industry and retail knew that this would happen, but because we were not organized or had no representation in the government at that time, we only knew when the law came out. This was a great lesson for the distribution channel, as from that, we formed Abradisti (Brazilian Association of Information Technology Distributors), which brought everyone to the same table, with the same ideas and ideals ”, comments Bublitz, who is one of the entity's vice presidents.

Marcos Coimbra, CEO of All Nations and also vice president of Abradisti, says that the tax substitution regime makes computer products more expensive for consumers. Among the reasons that lead to this are “the increase in operating expenses due to the implementation of the TS, the margins stipulated by the legislation in force - which are above what is practiced by the market in various products - and the ICMS for the chain that is paid in advance by the distributor, generating financial cost ”, he enumerates.

Coimbra agrees that the beginning was complicated, mainly because the state finance departments did not know the subject in depth. “But All Nations did a task force and we adapted quickly. Unlike many companies that go through this change, we do not stop billing during the implementation of the TS ”, he says. According to him, if all states had protocols among themselves, the system could be a great tool to combat tax evasion. “We are still far from that. Despite the fact that the biggest states are already operating with ST, not all have signed common protocols ”, he says.

Outside the rule, but keeping an eye on it Paraná has no tax substitution and has not adhered to the agreement of the states, that is, it receives and sells without ST to any location in Brazil. Even so, with the TS in force in other states, Aldo had to make an extra effort to adjust the systems and the accounting area. It also invested in the website, with ST simulators so that the customer who places the order over the internet knows if a certain product is taxed and how much it will collect at the destination, in addition to training the sales team.

“When I see that other states want to anticipate resources and say that a notebook must have x, y or z margins, depending on the line, understanding that that is a market rule and that the retailer has all the margin embedded in the sale price, it ends collecting higher tax than is practiced at the tip, mischaracterizing the ICMS basis, which is non-cumulative circulation tax ”, says Aldo Pereira Teixeira, president of Aldo. “There are states that are more rational and others that are more greedy in collecting”, he adds.

The president of the distributor highlights an issue that companies cannot forget, that of real profit. “The companies that are in real profit are the most competitive in the computer market. Once again, it is evident that the government is concerned with collecting more. Adapting to the real profit is still the legal way to have all the tax incentives and benefits that the Brazilian IT law proposes ”, he advises.

According to Teixeira, a survey carried out with six thousand resellers in the South and Southeast points out that 80% of the companies are still in the Simples system or in the presumed profit. "Whoever changes enters a new world, but it is still less painful for those who are in real profit and much more suffering for those who are in Simples", he concludes.

Source: Reseller Web