Tag: Combating informality

Closing of micro and small companies can be done in three days

Debureaucratization measures for the benefit of small businesses are expected to be announced next week by President Dilma Rousseff. The possibility of editing a provisional measure is also studied, setting the readjustment of the income tax table at 6,5%.

The Planalto effort aims to reverse the government's declining popularity and the imminent release of the list of parliamentarians and other officials to be investigated in Operation Lava Jato.

Still this week, the president will analyze a proposal that creates transition bands for companies to gradually leave Supersimples, a tax system that reduces the tax burden by up to 40%. It is the project Grow Without Fear by Minister Guilherme Afif Domingos.

In the case of reducing bureaucracy, this is to facilitate the closing of companies in Brazil, considered as one of the worst countries in the world in a business environment in the World Bank's Doing Business Report.

Through a computer program, the entrepreneur can do this over the internet in three minutes. There are 1,2 million inactive companies that have not been closed due to excessive bureaucracy.

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Source: site contabeis.com.br (20/02)

 

Number of formal workers increases almost 60% in 12 years

The number of formal workers with a formal contract increased 59,6% between 2003 and 2014 in the six metropolitan areas surveyed by IBGE (Rio, São Paulo, Recife, Salvador, Belo Horizonte and Porto Alegre), from 7,349 million to 11,731 million of people.

The rate of increase was much more intense than that of the employed population in general, which rose 24,7%, from 18,520 million to 23,087 million people in the same period. The move confirms the trend of formalizing the Brazilian labor market in recent years. The signed portfolio guarantees access to labor rights and is a sign of work with more income and quality.

Source: Jornal do Comércio (05/02)

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Informality stops falling

The underground economy, that is, the set of activities intentionally not reported to the government in Brazil, has been shrinking year after year, since it was estimated in 2003 by the Brazilian Institute of Ethics in Competition (ETCO) in partnership with the Brazilian Institute Economics of Fundação Getúlio Vargas (FGV / IBRE). This reduction is credited to the improvement of the institutional environment, which has benefited in recent years from advances in the performance of the economy and other factors that contributed to the formalization of companies and employment ties.

In the most recent estimate of the institutes, released on the 12th, however, a worrying trend was observed. The 2014 Underground Economy Index was estimated at 16,2% of GDP, just 0,1 percentage point lower than that measured in 2013. In absolute numbers, it is R $ 833 billion, compared to R $ 787 billion in 2013. This is the smallest reduction in the index ever seen since the beginning of the survey (in 2003, the index was 21%). According to the experts responsible for the index, the trend for the coming months is that the pace of decline in informality will slow down, especially if the economic growth forecasts observed so far are confirmed.

The trend towards stabilization in the reduction of informality indicates that some corrections are necessary at this time. If, until now, tax exemptions promoted to alleviate the tax burden in various sectors have collaborated with the formalization of the economy, from this moment on, tax simplification may have a more comprehensive role in reducing informality. There is no denying the importance of exemptions for the economy as a whole. But, as far as can be seen, its effectiveness with regard to formalization tends to stabilize. Thus, tax simplification can enhance the effects of tax relief more broadly on the productive sectors of the economy.

It is also necessary to continue and accelerate the structural changes that we seek for society, such as, for example, increasing the educational level and reducing the unemployment rate. The growth of the formal labor market is close to its limit. Two major bottlenecks hinder the continuity of this evolution. One of them, well known, is the labor laws that bind the economy. The other, less obvious, but with a lot of impact on reducing informality, is the level of education of Brazilians.

In the past decade, informality in the labor market has dropped by more than 10 percentage points, from 33% to less than 22% of the total employed population. The increase in the average education level of Brazilian workers can account for up to 64% of this drop. The positive relationship between schooling and formalization brings positive perspectives with regard to reducing informality in the future.

If, on the one hand, softening rigid labor laws is an increasingly essential mission, investing in education is much more than a goal, it is an obligation for the nation to become more competitive and position itself better among the main economies in the world . Finally, it is necessary to simplify and rationalize the tax system; modernize the collection system and make compliance with the law less painful for the population.

 

*Evandro Guimaraes is executive president of the Brazilian Institute of Ethics in Competition (ETCO) and Fernando de Holanda Barbosa Filho is an economist and researcher at FGV / IBRE