Author: Cristiano Romero

Source: Valor Econômico - São Paulo / SP - BRAZIL - 10/03/2010

Research carried out by the National Confederation of Industry (CNI) showed that the accumulation of tax credits affects the decision to export 44,3% of Brazilian exporting companies. In the case of those that export most, that is, those whose sales abroad account for more than 50% of sales, the problem reduces the export momentum by 54,6%. The government is currently preparing a package of measures to support exports, but the Minister of Finance, Guido Mantega, warned, in an interview with “Folha de S. Paulo”, that there will be no solution for the unpaid credits.

Brazil deals badly with the idea, spread around the world, that it does not make sense to export taxes. Taxes, the way they are charged in the country, reduce the competitiveness of Brazilian companies. The Constitution determines the exporter's tax immunity, but in practice, this has never been applied. In the last decade and a half, several measures, such as Complementary Law 87 (Kandir Law) and its subsequent improvements, were adopted to reimburse exporters of taxes paid, mainly the ICMS, along the production chain. The system, however, does not work well.

To give you an idea, last year, the Union transferred R $ 1,95 billion to States and municipalities based on the Kandir Law. The amount is equivalent to just 0,85% of the total collected with the ICMS in 2009. It is true that the federal government, due to the world crisis, transferred, in the last year, another R $ 2 billion to the exporting states as financial aid . In total, the transfer represented only 1,7% of ICMS.

In 2008, when it sent a proposal for tax reform to Congress, the Ministry of Finance recognized, based on data accounted for until 2006, that the volume of ICMS non-offset credits was R $ 17 billion. In the case of PIS / Cofins credits, the account was estimated at R $ 13 billion and, in the case of CIDE and ISS, R $ 14 billion, reaching a total of R $ 44 billion (1,9% of GDP).

Not all of these credits, calculated by the Treasury as an effect of the cumulative effect of those taxes, derive from exports, but, as the economist José Roberto Afonso rightly points out, experience indicates that most do come from there. An interested party in the matter, the Federation of Industries of the State of São Paulo (Fiesp) claims that the bill is more salty - the unpaid credits of PIS / Cofins would be R $ 20 billion, and ICMS, R $ 40 billion .

Any measure to stimulate exports that ignores the problem of tax credits - the stock and the future flow - therefore sounds palliative. For this reason, Afonso drew up an ingenious proposal to securitize ICMS non-offset credits. It would be an emergency solution, but with the presence of elements to induce the Union and States to reach, in the near future, an agreement on what can really relieve exports in the country - the realization of a tax reform.

Afonso's proposal, which will appear in the next issue of the Revista Brasileira de Comércio Exterior, edited by the Fundação Centro de Estudos do Comércio Exterior (Funcex), foresees the issue of a title by the States, attesting the right of the exporting company to receive, in which is due to ICMS credits not offset. The paper would be issued electronically and registered with Cetip. But how do you know exactly what states owe to exporters?

Since 2005, the state finance departments have informed the Federal Revenue Service about the list of exporters, the amounts exported, the credits acquired by them, the total of the balances constituted and the authorized transfers. Thus, Afonso recalls that the government knows exactly the size of the problem, although he never released the figures. Based on this register, says the economist, it would be possible, through task forces, to verify the accuracy of the records after crossing them with federal databases (Siscomex, for example). A cut-off date - prior to the announcement of securitization - would be adopted for the application of the benefit.

The idea is for the federal government to make the payment directly to the exporter. It would work like this: the transfers owed by the Union to the States, as financial aid for the promotion or promotion of exports, would guarantee the paper issued by the States. The company could therefore redeem its title directly from the National Treasury. Afonso explains that the procedure is similar to that adopted recently in the operation of prepayment of oil royalties - the difference is that, in this case, the creditor was Petrobras; in its proposal, the creditor will be the Treasury.

“As the Treasury would become a creditor of itself, in practice, one operation would cancel the other”, explains the BNDES licensed economist, now in the service of the Senate. “In fact, in financial terms, disbursements from the Treasury would be made directly in favor of exporters, in connection with the purchase of ICMS tax credits, but at the same time, in budgetary and accounting terms, the Union would be granting financial aid to the State debtor."

The proposal solves the problem of the past and suggests that criteria be adopted to avoid its repetition in the future. It is clear that a permanent solution will only come with a tax reform. The accumulation of tax credits that end up not being honored by either the States or the Union stems, to a large extent, from a distortion of the Brazilian tax system - the application of ICMS in interstate transactions, in which a significant portion of revenue (up to 12%) is in the state of origin of the goods.

“The problem is that, in Brazil, due to the interstate nature of the ICMS, in general, the state treasures that benefited from the sale of inputs and capital goods to exporters are not always the treasures that should return the accumulated credits to their taxpayers”, explains José Roberto Afonso.

Cristiano Romero is a special reporter and writes on Wednesdays.