Tag: Tax Burden

Confaz calls for postponement of ICMS reform

The National Council for Farm Policy (Confaz) decided on Friday, 15/08, at its most recent meeting, to suggest to the Senate to postpone discussions on the ICMS tax reform until after the elections. Bill 130, which is being processed by the Economic Affairs Commission (CAE), tries to end the unanimity requirement for the approval of tax incentives at Confaz.

The PL rapporteur, Senator Luiz Henrique (PMDB-SC), has not yet been officially notified of Confaz's request, according to José Clovis Cabrera, coordinator of the Tax Administration of the São Paulo Finance Department. The next meeting of the CAE is scheduled for September 2 and it is likely that the senator will speak on this date on the postponement of the vote.

Despite the request for postponement, states are seeking a rapid approval of the text. One way to pressure parliamentarians was the approval in July, by a group of 20 states and the Federal District, of a proposal to end the so-called fiscal war. Through ICMS Agreement No. 70, they undertake to withdraw the tax benefits granted without approval from the agency, as well as grant a tax amnesty to all taxpayers who were assessed for having used these incentives.

"The agreement brings the steps to arrive at a tax reform, which needs to urgently leave to attract and keep investors", says Hélcio Honda, legal director of the Federation of Industries of the State of São Paulo (Fiesp). For him, the change in the presidency of the Supreme Federal Court and in its commissions may cause the summary of the fiscal war to be edited ahead of schedule. “Therefore, a solution, with a strong pulse from the Union, cannot be delayed.”

According to Honda, a summary would precipitate the judgment of actions against incentives granted without authorization from Confaz in the lower courts. “The disaster would be the retroactive effect. Everything that companies gained with tax incentives, would have to be returned ”, says Honda.

Source: Online Value

Government, interventions and skeletons

State interventions in the economic domain can and should be made in certain circumstances, with a constitutional provision in this regard (art.173 and 174 of CF / 88). However, there are limits that cannot be crossed. If it intervenes in the economic activity in such a way as to cause abnormal losses to a certain individual or group of individuals, the State must indemnify the injured parties to the extent of the damage it causes them.

Therefore, in any intervention, the State must weigh not only the direct costs of the activity, but also the reflexes to which it will be subject. I refer to “skeletons”. Examples of these are the well-known legal demands arising from government intervention in the air and sugar and alcohol sectors in the 1980s and 1990s. Although the situations are not identical, there is in common the fact that the State obliges private individuals to practice administered prices and tariffs, setting them, however, at unreal levels and below the production costs of the respective sectors.

The Federal Supreme Court recognized the right to compensation in these cases. In spite of this, what is happening is the rebirth of Union interventions in the economy, which, in addition to harming the free play of market forces, has caused dysfunctions in certain segments.

Some examples deserve specific considerations. The first concerns the government's intervention in Petrobras, with direct impacts on the company, its shareholders and other participants in the fuel market. The former, as a controlling shareholder, has used the freezing of fuels as a way of controlling inflation, subsidizing the price of gasoline in the domestic market. As a result, there is information that, from 2010 to 2013, the company lost almost 50% of the value, the common shares depreciated 61,2%, between 2009 and 2013, and profits have fallen significantly.

In 2012, for example, net profit decreased by 3696 compared to 2011. Between 2010 and 2013, the direct loss resulting from the import of gasoline for resale amounts to approximately RS 2,3 billion. The shareholders, demonstrating the deviation from the controller's purpose, may demand that he be responsible for the damages caused to the company. The second example refers to alcohol producers, who have suffered losses as a result of the same policy. In fact, for reasons of energy efficiency of fuels (perfect substitutes), it is only advantageous to supply the vehicle with alcohol, instead of gasoline, when the price of the vehicle is less than 70% of its price.

Therefore, as the price of gasoline is out of date, that of ethanol must accompany it. The losses of the sugar and alcohol sector, as a result of these factors, are estimated between 11 $ 29,7 and R $ 38,7 billion and must be compensated for being caused by a government act, which has set prices with the objective of controlling inflation, when it should do so in the interest of the company (Petrobras) to serve its corporate purpose.

The third example refers to the State's intervention in the electricity sector, by artificially keeping the price of electricity consumed artificially, imposing losses on distributors and concessionaires. Also affected by the persistent scarcity of hydroelectric generation, they are forced to purchase, in the short term market, more expensive energy, from thermoelectric generation. without the necessary transfer of cost to the consumer. As a result of the losses, the government announced direct compensation to the sector through a package of measures totaling approximately R $ 12 billion, resulting from direct contributions made by the National Treasury and bank financing to the Electricity Trading Chamber.

If the losses exceed the direct compensation, the companies will have the right to be compensated. It is clear that state interventions must be made only in exceptional circumstances, when primary public interests so require, and the costs must be rigorously calculated. In addition to causing dysfunctions in the market, they create present and future burdens. The latter, the skeletons.

 Hamilton Dias de Souza, tax attorney and member of the Consultative Council of the Brazilian Institute of Ethics in Competition - ETCO

Tax burden increased 10 percentage points after creation of the real

According to the IRS, the tax burden - weight of taxes on the economy - jumped more than 10 percentage points after the Real Plan.

The currency's stability brought costs to the taxpayer. Necessary to bring down inflation, the fiscal adjustment resulted in an increase in taxes. According to the IRS, the tax burden - weight of taxes on the economy - jumped more than 10 percentage points after the Real Plan. From 25,72% of the Gross Domestic Product (GDP) in 1993, the year prior to the plan, the indicator rose to 35,85% in 2012, the most recent data.

To balance public accounts, the federal government created and increased taxes in the years following the creation of the real. The highlight was social contributions, whose revenues are all with the Federal Government. The main ones are Social Contribution on Net Income (Cofins), PIS, Pasep and the Provisional Contribution on Financial Transactions (CPMF), which taxed financial transactions until 2007. Voracity over taxpayers, however, highlight experts, punished the poorest sections of the population and did not result in improved public services.

resident of the Brazilian Institute of Planning and Taxation (IBPT), João Eloi Olenike says that the real accentuated a trend started with the 1988 Constitution, which allowed governments (federal, state and municipal) to obtain more and more resources by increasing tributes. For him, the biggest problem is that taxation in Brazil is concentrated on consumption and wages.

With a regressive character, taxation on consumption punishes the poorest because the rates are levied on the final price of products. For merchandise that costs R $ 5 and has a 20% rate, the consumer will pay R $ 1 in taxes, regardless of social class. Proportionally, the amount weighs more in the pocket of the poorest. With direct payroll deductions, taxation on wages taxes workers, not entrepreneurs.

“Today, in Brazil, we don't have a tax policy so that there is a tax collection according to the contribution capacity of each citizen. Yes, there is a tax collection policy. The more I collect, the better ”, criticizes Olenike. He advocates a tax reform carried out in stages that shifts the focus from taxation to profit and equity, which have the greatest impact on the wealthiest sections of the population. “Today there is no interest in making tax reform. If more and more is collected, why do tax reform? ”, He asks.

In 2012, taxes on consumption and wages corresponded to 76,26% of the collection, according to the IRS. In the countries of the Organization for Economic Cooperation and Development (OECD), a group that brings together developed nations, the average corresponded to 58,35% in 2011. Taxation on income and wealth amounted to 21,69% of the collection in Brazil, against 38,27% of the OECD.

For Cláudio Damasceno, president of the National Union of Tax Auditors of the Federal Revenue (Sindifisco Nacional), the distortions in the Brazilian tax system persist because, until today, big capital defines the direction of tax policy. “We have a first world load and a third world return on the services that the government ends up offering to the population. Since the creation of the real, little has changed ”, he comments.

Damasceno cites the 61% lag in the correction of the Income Tax table and the exemption in the distribution of profits and dividends to partners and shareholders as measures that have worsened the Brazilian tax system for the lower income population in the last 20 years. “In developed countries, the tax on assets is much higher. This discrepancy has deep roots ”, he says.

Despite the increase in the tax burden in the last two decades, the IRS does not consider the weight of taxes on the economy high in relation to other countries. According to the body, Brazil is in an intermediate position in comparison with the 27 OECD countries. In addition, the IRS informs that some countries like Chile, whose tax burden amounts to 21,8% of GDP, do not have Social Security.

The Economic Policy Secretariat of the Ministry of Finance claims that the net tax burden, which deducts from taxes collected the return to society through subsidies and income transfers, has remained virtually stable in recent years, rising from 18,39% in 2002 (oldest data available) to 19,82% in 2012. According to the secretariat, the net tax burden is more important than the gross tax because it considers government returns, which increase private sector disposable income and the well-being of people. families.

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