Formalization moves the patchwork and related arts market

Source: SEGS - National Insurance & Health Portal - 09/09/2012
 
 
Since July 2009, the Federal Government's Individual Microentrepreneur (MEI) program has been in place, which has been providing significant increases in revenue for more than half of the entrepreneurs who are formalized. According to data from the Brazilian Institute of Economics of the Getúlio Vargas Foundation (Ibre / FGV) and the Brazilian Institute of Ethics in Competition (ETCO), the Brazilian informal economy decreased for the eighth consecutive year.
 
For the consultant at Sebrae / PR, Claudinei Guilherme, this change in the economic scenario can be explained by the facilities that formalization has on the micro-entrepreneur business. “The sharp reduction in informality is due to the increase in the letter of credit made available by financial institutions. To have access to the system, it is necessary for the entrepreneur to formalize ”, he explains.
 
The expansion of formal employment is not only characterized by easy access to credit lines, but also by the collection of taxes at reduced rates and social security benefits. "The entrepreneur's greatest concern is to be able to expand his business and this is motivated by added values, such as being able to issue invoices, sell his products to other companies and collect INSS", says Guilherme.
 
Craft market
 
In the last 10 years, the national craft consumption market has been expanded and has become a benchmark for business opportunities. “Before, the profile of quilters was that of a person passionate about manual arts. However, nowadays, many become artists on occasion, starting activities without commercial interest, just for the purpose of distracting and meeting people. And, in the end, with the encouragement and appreciation of family and friends, they become professional and become entrepreneurs in the segment ”, explains Emília Aoki, promoter of the Quilt & Craft Show.
 
Patchwork and related arts are no longer just hobbies and have started to contribute to the good economic indexes in the country. An unofficial survey carried out with the exhibitors of the 2nd Quilt & Craft Show pointed to a 20% growth in the segment, in South Region, compared to last year. Despite this, high demand suffers from the scarcity of domestic industrial production. “The market for patchwork and other art techniques with fabric, grew rapidly and Brazilian industries were unable to keep up with this pace. To meet demand, it is necessary to import foreign products ”, declared Emilia Aoki.
 
The formalization of small artisans, in this sense, would not only benefit the entrepreneur, but would heat up the production of inputs on a large scale. "Getting out of informality is important for the small business owner, as it facilitates the acquisition of raw materials, at wholesale, and develops the industry itself, increasing the number of suppliers", says Aoki.
 
Change of plans
 
It was by following other paths that the businesswoman Eliane Castelan left the primary dream of being a nurse to become an artist in the patchwork technique. After a period of five years, living in France, Eliane got to know manual arts and developed her skills. "In 1988, I went to live in France and started taking patchwork classes, an activity that, since then, has been part of my life and is my main source of income".
 
Upon returning to Brazil, the businesswoman informally taught classes and marketed her products for a long period. However, seven years ago, she started her own company and today she generates jobs for 14 people, directly and indirectly. “From the moment I formalized my business, I had a significant return on sales and attracting students and I was able to expand my staff. I know that I can't stop because other people depend on this job ”, he concludes.
 
To learn more about how to formalize a business, Sebrae will maintain a stand throughout the 2nd Quilt & Craft Show, which takes place from September 05th to 08th, at Expo Unimed Curitiba. More information on the website: www.quiltshow.com.br.

The good news, a warning and taxes

Source: The State of S. Paulo (São Paulo - SP) - July 23, 2012

by Roberto Abdenur *

The Underground Economy Index (IES) brings good news, a study that estimates the values ​​of activities deliberately not declared to public authorities in order to evade taxes and those of those who are in the informal sector due to excessive taxation and bureaucracy. In 2011 it represented 16,8% of the gross domestic product (GDP), which corresponds to R $ 695,7 billion.

The news is very good because, in the previous year, the estimated size of the HEI was 17,7% of GDP, or R $ 715,1 billion. The study on the IES has been carried out by the Brazilian Institute of Economics of the Getúlio Vargas Foundation, together with the Brazilian Institute of Ethics in Competition (Etco) since 2003, when the underground economy was estimated at 21% of GDP.

Between 2004 and 2006 the estimated size of this economy was around 20%. In 2007 it dropped to 19,5%, as a result of the increase in formal work. The economic situation in the country, the growth of class C and the good prospects for the future confirmed the trend towards formal employment. In 2008 and 2009, the HEI was 18,7% and 18,5%, respectively, which continued to confirm the trend towards a reduction in activities that are outside the formal economy.

Here comes the alert. Reaching the levels of developed countries - where IES is around 10% - seems distant, despite the number of 2011 (16,8%). It is that the downward trend may be temporarily reaching its limit in Brazil, due to the loss of dynamism in the economy and the reduction in the pace of credit growth.

The loss of dynamism in the economy is reflected in the prospect of a lower GDP. This tends to affect the labor market, which increases household indebtedness and makes credit difficult. The moment of wonder passed with the consumption of the new middle class, when realizing that everything depended on numerous installments to be honored.

In addition to the slowdown in the economy, the high tax burden is also a factor in the informalization of activities in the country. The current tax system raises the cost of industrial production, impairs internal and external competitiveness, discourages investments, decreases consumption, increases unemployment. , encourages tax evasion and, as a general result, contributes to informality and the underground economy.

Comparing tax burden and GDP per capita, Brazil is very poorly placed, according to data from the World Bank. Taxes in the country (36% of GDP) are at the same level as Russia, Ireland and Australia and exceed the United States and South Korea. But these countries have GDP per capita higher (three to five times) than ours. On the other hand, our taxes exceed those of countries like China and India, in addition to Argentina and Mexico, which have GDP per capita more similar to that of Brazil and compete with us.

Tax collection is vital for the State, but the tax system must be in harmony with other factors inherent to economic activity. In Brazil, in addition to the high tax burden, the problem lies in the complexity of paying taxes and the rigidity of legislation for those who work in legality.

Another World Bank study, called Paying Taxes, showed that, in 2008, a standard company spent no less than 2.600 hours a year to pay basic taxes in Brazil. It was the worst result in the world. In the United Arab Emirates, for example, it was 12 o'clock; in Switzerland, 63; in Venezuela, 864.

The time spent is a direct consequence of the complexity of tax legislation, which from 1988 to 2005 had an incredible 3,4 million rules issued. The delay in simplifying and rationalizing the tax system has been one of the biggest obstacles to the modernization of the Brazilian economy. To the extent that such complexity is used as a justification for tax evasion, it benefits transgressors, deteriorates the business environment, removes investments and reduces the country's growth potential.

A simpler system, on the contrary, encourages the productive sector, encourages consumption, promotes formal employment, raises workers' income, reduces tax evasion and reduces informality. At this stage, it is not a matter of promoting a broad tax reform - which may require years of debates and adjustments -, but of studying specific proposals that may have almost immediate results. Among these proposals are the unification of taxes and fees with the same calculation basis and taxable event, such as goods and services (IPI, ICMS, ISS), billing (PIS, Cofins), income (IR, Social Contribution) or imports (IPI , ICMS, ISS, Cofins, tariffs).

In view of the trend pointed out by the Underground Economy Index and the global scenario, a joint effort is now needed - between the Executive, Legislative and Judiciary Powers with society - to stimulate formality in the Brazilian economy.

We live in a unique moment in our economic history, favorable for the revision of a series of rules that, historically, prevent the healthy growth of our economy. President Dilma Rousseff's commendable effort to end the so-called fiscal war and move forward in the modernization of tax rules, as well as the institution of individual micro-entrepreneurs - just to mention two recent facts - are examples among countless proposals that must be evaluated and put into practice. practice.

It is clear that there is only one way to reduce the size of the shadow economy. And this path consists of five measures: improving the tax system, reducing tax evasion, reducing illegal trade and piracy, reducing the informal economy and, not least, fighting corruption. We have made progress on these fronts, but much remains to be done.

* DIPLOMATA, IS EXECUTIVE CHAIRMAN OF ETCO

Good News

Rio - The informal economy has shrunk in Brazil for the eighth year in a row, according to data from the Underground Economy Index in 2011, calculated by the Brazilian Institute of Competition Ethics and the Getúlio Vargas Foundation, released last week. In other words, the number of those who are looking for the advantages of the formal economy has been increasing, such as being able to display proven income for loans, installments and rental properties. Not to mention the fact that it is no longer vulnerable to inspection and assessment by regulatory bodies.

The increase in the supply of credit, whose access induces the search for formalization - both by employees and by entrepreneurs - and government incentive programs for small entrepreneurs, such as Individual Microentrepreneurs and Supersimples, were pointed out by the index researchers as preponderant factors. for this change of scenery.

Another good news, also recently released, gave us an account of the growth of micro and small companies in Brazil. According to recent information, taken from the General Register of Employees and Unemployed of the Ministry of Labor and Employment, micro and small companies with up to 99 employees generated 75,7% of formal jobs in the country in May. In other words, out of every ten vacancies, more than seven were created by small enterprises.

However, if on the one hand the numbers show that small businesses have been shown to be important in generating jobs in the country and for the Brazilian economy, they also indicate that it is essential, in the formulation of public policies, to constantly evaluate the rules that govern this process. market.

Any mistake in these policies may hinder the migration to formality, not to mention the risk of causing small entrepreneurs to return to informality, in addition to favoring illegal trade, thereby stimulating tax evasion.

And that would not be fair because, although there are those who are not interested in leaving informality, as is the case with people who sell pirated products, most seem not to like being in this situation.

Moreira Franco is minister of the Secretariat for Strategic Affairs of the Presidency of the Republic

The shadow that falls

Source: O Globo - Column Míriam Leitão - 04/07/2012

The shadow economy has shrunk by almost one percentage point of GDP and has even fallen in absolute numbers. From 2003 to 2011, it declined every year, rising from 21% of GDP to 16,8%. The organizers of the indicator - Etco, Instituto de Ética Concorrencial, and Fundação Getulio Vargas (FGV) - think that the process of progress is running out. They detected signs that informal employment has stopped decreasing.

The concept of shadow economy is more sophisticated than the informality measure. He tries to capture even the unregistered movement of a formal company and the undeclared income of registered workers. The best known case is that of waiters with tips.

The biggest component of the Shadow Economy Index is informality in the labor market. To compose the data, FGV works not only with PME, but also with Pnad. It was there that they found evidence that the virtuous circle is wearing thin. In the graph below, it can be seen that the index fell every year, even in difficult ones.

- The downward trend in informality may be reaching its limit, due to the loss of dynamism in the economy and the labor market and by the reduction in the pace of credit growth - said Ambassador Roberto Abdenur, president of Etco.

Researcher Fernando Holanda Barbosa Filho, from FGV, responsible for the index, confirms this impression.

- An important part of the drop in informality is that of the labor market, which, in the last six months, has stopped falling. This is one of the reasons for our impression that this virtuous circle may be reaching its limit - said the researcher.

Etco and FGV have made a serious effort to measure and diagnose the problem of the undeclared economy. The first time they measured, they compared the size of Brazil's underground economy with Argentina. Fortunately, the neighbor grew and the underground economy in Brazil decreased, so the comparison can no longer be this.

Even so, the size of the shadow economy is estimated by them to be R $ 695,8 billion, more than one Sweden.

- Part of this positive downward movement in the underground economy was a consequence of the expansion of credit, which is now decreasing due to the increase in household indebtedness - said Fernando Holanda.

Even so, he says that it is not just cyclical factors that explained the improvement. In another study not yet concluded, the economist already has evidence that part of this advance has to do with the improvement in Brazilian education. The increase in the level of education boosted formalization.

Even though the improvement in education was small, it already makes a difference on topics like this, informality.

What makes Brazil have such a large undeclared economy or in the gray area, where part is in the legality, part is not?

Abdenur presents the reasons: high tax burden, complexity of paying taxes, rigidity of legislation for those who work in legality, especially in the labor market.

- Between 1988 and 2005, the Brazilian tax burden increased by 88%, according to the Brazilian Institute of Tax Planning - said Abdenur.

The problem is that it has increased unevenly. Some sectors pay too much tax, others are encouraged at a discount.

- Worse is the complexity of paying taxes - says the ambassador.

Etco is based on saying that in a World Bank study. Comparing the countries, he concluded that Brazil had the worst result in the world. A standard Brazilian company spends 2.600 hours a year just paying taxes. In Bolivia, which also performs poorly in this indicator, it is 1.080 hours. In Brazil, 554 standards are issued per day. It's crazy.

So this whole topic is more complicated than it looks. There is an overlap between the legal and the non-legal, between the formal and the informal, between light and shadows in the Brazilian economy.

Even measuring is a difficult effort. Etco started doing the calculation in 2003 and at least so far the news is good. It is to hope that this shadow remains falling.

Three questions for Fernando de Holanda Barbosa Filho

The researcher at the Brazilian Institute of Economics of the Getúlio Vargas Foundation (IBRE / FGV) Fernando de Holanda Barbosa Filho, responsible for the Underground Economy Index, talks about the study and its impacts on society. Barbosa Filho has a degree in economics from the Federal University of Rio de Janeiro, a master's degree from the Graduate School of Economics and a doctorate from New York University. Currently, he is also a professor at FGV.

Why is it important to measure the Shadow Economy Index?

The measurement of the index is very important, mainly because it discovers the size of an economy that is outside the formality. This means that the tax burden as a fraction of GDP would be less than what we observed, as there is a part of the product not captured. The tax base is smaller, that is, the government is charging a very high fee, which a good part of the population is not paying. If all people contributed to the payment of taxes, through formalization, the tax burden would be much less. Through the index it is possible to make tangible and to know the size of what you do not know, since the research reduces the ignorance of something important. An informal economy equivalent to the size of Argentina cannot be overlooked. We need to take advantage of this study to develop actions that bring an important portion of our product to formality. Certainly, informality is just a symptom of a disease that causes people to act informally.

What are the factors that most contribute to the underground economy?

The high tax burden and excessive regulation are factors that, if we are not careful, end up harming the economy. Another important factor, which encourages people not to leave informality, is corruption. We need to pay attention to the fact that corruption works on two ends. The first is a social justification, due to the fact that the taxes collected are often not invested in investments through public policies in other sectors of society, such as education, health, basic sanitation, among others. And, on the other hand, when the individual thinks he will be caught as a tax evader, he often appeals to the agent he supervises, and this works. There are several channels, and it is this set of factors that simultaneously affects the Brazilian economy.

What is the method of calculating the index?

There are two combined methodologies: the monetary method (a currency demand equation is estimated) and informality in the labor market (based on data from PNAD). From these data, an average is calculated between the two ways of estimating what is intangible. Obtaining this estimate is an exceptional advance and answers one of the main questions, namely, measuring how much is produced in the Brazilian underground economy and comparing this with other indicators, obtaining a concrete order of magnitude.

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Something to celebrate, a lot to do

The Brazilian economy grows and consolidates. Nevertheless, we still have a lot to do to reduce that level of activity that is not in the official records, which is outside the formal economy. This is called the underground economy, one that does not appear on the formal surface, does not pay taxes, fees or taxes. And, of course, it undermines a country's economic development and compromises labor relations and the business environment.

Informality brings direct damage to society, by creating an environment of transgression and stimulating opportunistic economic behavior, with a drop in the quality of investment and a reduction in the growth potential of the economy. In addition, it causes the contraction of government resources for social programs and investments in infrastructure.

It is difficult to know the exact size of the underground economy, but it is possible to estimate it, to have a rough idea. In 2006, at the request of the Brazilian Institute of Ethics in Competition (ETCO), the Brazilian Institute of Economics of the Getúlio Vargas Foundation (IBRE-FGV) developed a method of estimating the size of this economy. This work has been carried out since then, with retrospective analysis, reaching up to 2003. As a result, in 2003 the estimate showed that the underground economy reached 21% of the Brazilian GDP, a value of R $ R $ 570 billion.

From 2007 to 2009, the estimate showed that the size of the underground economy was at an average level of 19%, that is, around R $ 640 billion, which corresponded to the size of the economy of neighboring Argentina, or twice the economy of the Chile. During those years, the index was somewhat stabilized, growing at a pace close to that of GDP. It was already considered a good indication that the shadow economy did not grow relative to GDP. In the developed countries of Europe, for example, the shadow economy revolves around 10% of GDP. On the other hand, there are countries in the Third World where something like 40% of the economy is estimated outside the formality. Thus, an average of 19% was no longer so bad.

However, the Brazilian economy grows and consolidates. And the good news is that this index dropped in 2011. The 2010 index indicated that the size of the shadow economy was smaller in relation to GDP, dropping to 17%. More precisely, 17,7%, or R $ 651,7 billion. The percentage decreased, although its value in reais was higher, because the GDP also grew, a scenario in itself promising. Therefore, an advance in all directions. Not only because the Brazilian economy has been growing consistently, but the undeclared part of this product has been contracting.

The forecast for 2011, based on this downward trend, is 17,2% of GDP, or R $ 613 billion. This confirmation depends on the final results of the year that will still be released in the first half of next year.

What, after all, is the underground economy? It would be “simple” if the entire underground economy came from 100% parallel activities. But part of the formal economy is also informal. In the case of tax evasion, for example, there is a fine line of variation. Both professionals and companies exercise part of their activities in legality and part in informality, albeit due to different circumstances. The expressions "outside" or "box two" clearly depict what is done to divide the formal from the informal.

For this reason, the effort has been made to clarify the population on the importance of the circulation of goods and services taking place within a formal and regular process, within the economy and not outside it. But awareness is only a first step, and we know that changes occur when there is more than that. They occur when there is real pressure or a need for change.

The fall in the 2011 index shows that there was a real need to change the employment relationship and to value the formalization of employment. One explanation for this is, without a doubt, access to credit. In a context of stimulating consumption through credit lines, the requirement of proof of formal income to obtain financing ends up encouraging the formalization of employment. At the same time, the employee with a formal contract ends up realizing the greatest security in not buying informal products and becomes more sensitive to the appeal and the advantages of formalization. This can lead, at least for optimists, to a virtuous circle of the economy.

Globalization itself has been a driving force in this regard, since export and import require documentation of all kinds. The institutional modernization of Brazil also contributes, stimulating free competition within legitimate market mechanisms in every way. Economic growth, increased formality in employment, a reduction in the shadow economy and a rare confidence in Brazil's future form an auspicious scenario. It is the duty of public authorities and authorities, as well as of the whole of society, to keep a critical and constant eye on this issue. It is time to take possession of this salutary advance in the Brazilian economy and continue an economic policy that has contributed to putting Brazil in the direction of higher levels of development.

Roberto Abdenur is executive chairman of ETCO

 

Audio files

Interviews and news

2014

27/05/2014 - CBN Radio
Listen to the interview with ETCO Executive President Evandro Guimaraes, given to Journalist MILTON JUNG in the CBN Newspaper today, May 27th - 7am

2013

06/06/2013 - National Radio of Brasilia
Listen to Roberto Abdenur's interview with Rádio Nacional de Brasília on the 10 + 10 Debate Cycle

2012

27/11/2012 - CBN Radio - IES
Roberto Abdenur speaks to CBN about the Underground Economy Index

ETCO's Executive President - Roberto Abdenur, gave an interview to Rádio CBN on 18/12/12 where he talks about the Underground Economy Index and the stagnation of its results in the last study.

 

27/11/2012 - Rádio Jovem Pan - Informal Economy
Jornal da Manhã: Underground Economy Index

In the Jornal da Manhã program, presenters Roberto Muller and Leonardo Muller talk about the Underground Economy Index conducted by FGV and ETCO Institute

 

27/11/2012 - Rádio Jovem Pan - IES
Jornal da Manhã: Underground Economy Index

In the Jornal da Manhã program, the announcers Roberto Muller and Leonardo Muller present data from the Underground Economy Index conducted by FGV and Instituto ETCO

 

27/11/2012 - CBN Radio - IES 0:20
CBN talks about Informal Economy

The CBN newspaper comments on some figures presented in the Underground Economy Index carried out by FGV and Instituto ETCO

 

27/11/2012 - CBN Radio - IES 1:28
CBN talks about Informal Economy

During the Reporter CBN program, data obtained from the survey of the Underground Economy Index carried out by FGV and Instituto ETCO are presented

 

27/11/2012 - Rádio Band News
Band News: Informal Economy moves 17% of national GDP

At Band News, presenters talk about Informal Economy and the Underground Economy Index conducted by FGV and Instituto ETCO

 

 

27 / 01 / 2012 - Interview by ETCO President Roberto Abdenur to Rádio Jovem Pan about illegal practices in the fuel sector - This audio file is also available here in Windows Media (wma) format

2010

28 / 07 / 2010 - Underground economy - Ricardo Amorim - Eldorado Radio

26 / 07 / 2010 - Informal economy - André Franco Montoro - Rádio Nacional DF

21 / 07 / 2010 - Underground Economy Index - André Franco Montoro - Eldorado Radio

21 / 07 / 2010 - FGV study on underground economy - CBN Radio

21 / 07 / 2010 - Informal economy generated 578 billion in Brazil (1) - Radio Band News

21 / 07 / 2010 - Informal economy generated 578 billion in Brazil (2) - Radio Band News

2009

02 / 12 / 2009 - São Paulo intensifies the fight against piracy - Radio Band News

02 / 12 / 2009 - Financial crisis favors the growth of the informal economy - Young pan

01 / 12 / 2009 - FGV discloses IPC-S - Underground economy - Eldorado Radio

01 / 12 / 2009 - Informal economy grew 0,9% over GDP in the first half - CBN Radio

01 / 12 / 2009 - City free from piracy and illegal trade - CBN Radio

01 / 12 / 2009 - Curitiba will be the first city in the Piracy-free City project - Band News

30 / 11 / 2009 - Curitiba will be the first city free from piracy and illegal trade - Band News

04 / 06 / 2009 - Debate - People Talking Program - Trianon Radio

14 / 05 / 2009 - Interview with André Franco Montoro Filho - CBN Radio

2008

30 / 09 / 2008 - Interview with André Franco Montoro Filho - Eldorado Radio

30 / 09 / 2008 - Interview with André Franco Montoro Filho - Trianon Radio

22 / 07 / 2008 - Taxes - Interview with André Franco Montoro Filho - CBN Radio

04 / 06 / 2008 - André Montoro talks about the sale of Varig - Eldorado Radio

17 / 04 / 2008 - Underground Economy Index - Culture Radio

01 / 04 / 2008 - Interview with André Franco Montoro Filho - National Radio

28 / 03 / 2008 - André Franco Montoro Filho talks about possible increase in the basic interest rate that could be made by the Central Bank - Eldorado Radio

11 / 03 / 2008 - Interview with André Franco Montoro Filho - Radio Roquette Pinto

10 / 03 / 2008 - Interview with André Montoro on the informal economy in Brazil - CBN

07 / 03 / 2008 - Interview with André Franco Montoro Filho - AM Band Radio

2007

10 / 09 / 2007 - José Nêumanne - high incidence of tax evasion - Young pan

16 / 08 / 2007 - Interview - André Franco Montoro Filho - CBN Radio

 

More audio: Institutional ETCO spots

Studies and research

One of ETCO's main strategic operating tools is constant reflection on the most diverse themes. For this reason, the Institute promotes and encourages studies and research celebrated in partnerships with renowned institutions, such as the McKinsey consultancy, the Getulio Vargas Foundation (FGV), the Economic Research Institute Foundation (Fipe) and Ibmec (Brazilian Institute of Capital Markets) ).

Underground Economy Index (IES)

Pandemic affects informal activity in Brazil and brings down indicator

ETCO-IBRE/FGV survey reveals the size of the shadow economy

Underground economy in Brazil, moved something close to R $ 1,2 trillion reais, higher than the GDP of countries like Switzerland and Sweden

Recent Studies

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