Tag: Tax reform

Ethics and legality are fundamental to development

The tobacco industry pays the country's highest tax rates, between 70 and 90%. Meanwhile, taxation in Paraguay is the lowest on the continent, at 18%. The consequence of this, together with the lack of border control, is the growth of the illegal cigarette market in the country. Today more than 50% of the cigarette consumed in Brazil is illegal. As a result, the government stopped collecting R $ 11,5 billion in taxes on the sector last year. In addition, as contraband cigarettes do not meet the phytosanitary standards imposed on Brazilian companies, reducing smuggling will prevent Brazilians from consuming unregulated products. For the Brazilian Institute of Ethics in Competition (ETCO), if the taxes were lower, the consumer would buy more of the national product, and this would increase public revenue.
A survey carried out by ETCO, in partnership with the Brazilian Institute of Economics of the Getúlio Vargas Foundation (FGV IBRE), reveals that 16,9% of GDP - about R $ 1,17 trillion - originates from the informal economy. This calculation includes the production of goods and services not declared to the government. The evasion of taxes and contributions reduces costs and increases the profit of these companies in an illegal way.

“In the meantime, we, who want to keep up with our contributions, encounter all kinds of difficulties. Many 'penduricalhos' have been
placed over the years, and often the Treasury itself cannot understand this whole mechanism ”- highlighted Edson Vismona, president of ETCO and the National Forum Against Piracy and Illegality, during the Taxation and Sustainable Economy panel.
For him, effective practices that guarantee inspection and fair competition are not only a matter of ethics and legality, but, rather, a fundamental step for the development of the
parents. In the case of cigarettes, according to Vismona, the difference in price is drastic: if a pack of legal cigarettes is sold for R $ 7, the one obtained through smuggling can cost only R $ 3.
- Our market is being delivered to the traffic of these illegal products. In states like Mato Grosso do Sul, for example, 82% of the cigarette consumed comes from smuggling.
Organized crime finances itself with these billions that are evaded.

SECTOR SURVIVAL

To solve the issue of parallel products and guarantee the survival of companies in the sector, a group composed of several players has been discussing proposals to make legal trade viable and, thus, to benefit both companies and the government. One solution would be to review the taxation model for these industries.
- We agree that the tax burden on these products needs to be high. But we have to look at the demand, act to crack down on criminal organizations that benefit from this money.

If not, the market will be increasingly dominated by smugglers who pay nothing for it. The largest share of the market does not pay tax. Another practice suggested by currents in these sectors is the physical control of beverages and cigarettes. The ETCO president also stresses that the convergence of actions between public authorities and companies must be a two-way street, always respecting those taxpayers who are up to date with their obligations.
- Otherwise, the beneficiary will always be the regular debtor who makes non-payment of taxes his source of income, harming public coffers, competition and the whole of society.

History in Brazil is of great misunderstandings

In his explanation at the Taxation seminar in Brazil, tax attorney Everardo Maciel, former secretary of the Federal Revenue Service, brought up contemporary tax issues, both in Brazil and in the world - and the main differences in approaches in these scenarios. When it comes to the Brazilian situation, Maciel points out that this is a point of enormous social rejection, and that is why it is easy
find many hasty conclusions on the topic. Among the highlights, he points to the belief that foreign models can be easily reproduced here, without taking into account legal aspects of our reality. The fact that many professionals affirm that the tax system is extremely complex is also a belief that, according to him, needs to be analyzed.

- Complexity is inherent in the system. It needs to be operable and not simple. There are 27 ICMS laws, for example, and you need to have that, because the tax is state. But in general everyone is very similar to each other, except in special situations.

Among the main tax problems in Brazil today, the expert highlights points such as excessive litigation and bureaucracy - however, always stressing that this is a problem with the tax process and not with the tax itself. Therefore, solutions such as joining ICMS and ISS are considered simplistic.

- They are different taxes, with different destination. How is the federative issue? How is all the jurisprudence that exists around this? It is like throwing dirty water with the child in the basin. Is that what you want to do? Or is there a lack of willingness to think about it and find solutions with some degree of creativity?

The tax collector recovered the history of tax reforms that have already taken place in Brazil and assessed the trajectory as being more mistaken than correct. In his opinion, most interventions carried out after 1965 can be classified as disastrous. And Constitutional Amendment Proposal 45, known as the PEC for tax reform, follows the same line of misunderstanding.
According to Maciel, there are currently three major tax issues being discussed in various locations around the world: the erosion of tax bases; the taxation of the digital economy; and new sources of social security financing.

- The transfer of capital and the taxation of profits from countries with higher taxation to countries with lower taxation or without taxation, tax havens, is something that bothers everyone - he highlights.

The taxation of the digital economy, a highlight in this scenario, draws attention mainly for the creation of the GAFAM tax - currently under discussion in countries like France and the United Kingdom. It is an initiative of local governments to tax the big technology companies: Google, Apple, Facebook, Amazon and Microsoft. He also talks about the possibility of taxing financial transactions and robots as a way of financing social security.

Fiscal balance challenges lawmakers

Sustainable and harmonious taxes will favor more advantageous negotiations

Taxation and a sustainable economy presuppose adequate taxation. It cannot be very low, to allow the financial health of the State, and it cannot be high, to the point of stifling the economy and making business impossible. With this explanation, Phelippe Toledo Pires de Oliveira, deputy attorney general of the National Treasury, summed up the State's challenges in developing policies conducive to business development in the country during the Taxation seminar in Brazil. For him, reflecting on whether the tax bases are correct and whether they can be improved is of great relevance to the national scenario.
According to data from the latest study conducted by the Federal Revenue, in 2017, taxation in Brazil is based on consumption and the payroll. The rate on equity is less than 5%, while the rate on income is less than 20%, on consumption it is 48% and the one on payroll is 26%.
- Complexity is inherent to our tax system. It is complex because we have different tax types in the Brazilian system: taxes, fees, improvement contributions, compulsory loans. And each of these species still has its own taxes: Income Tax, contribution on the payroll, etc. Being complex, however, does not mean that it cannot be simplified.
For Oliveira, the challenges are great, and this is a great time for this discussion. To illustrate, he explains that currently the country has about 6 million tax foreclosures per year, only within the Union. There are approximately 1 million taxpayer lawsuits against the federal tax administration. The Deputy Attorney General recognizes that it is necessary to think about specific changes to simplify the system and reduce litigation. However, you need to be aware of
do not generate other unwanted occurrences.
- The end of the dividend exemption, for example, while bringing a benefit to end the discussion of disguised distribution of profits, also generated the phenomenon of "Pejotização" to pay less taxes. The individual who would receive that income taxed at a higher percentage creates a Legal Entity to be taxed at a percentage
smaller.
Oliveira also highlighted points such as the reduction of rates as a condition for the broadening of the bases. Despite the fact that tax benefits exist worldwide, it is necessary to ask whether they are fulfilling the purpose
should comply.
- The moment is to bring up these discussions, which until then were not very common in the tax sphere, but unusual among society.
Regarding tax reform, Oliveira says that the government's intention is to discuss the proposals and make the best of each one to arrive at a solution that is viable and reasonable for tax simplification.
- The desirable reform, in my opinion, is one that respects the federal pact, promotes simplification
and respect the fundamental rights and guarantees of the taxpayer.

Tax review is crucial to the country

Brazilian system is put in check by experts during Taxation seminar in Brazil

Marcos Lisboa draws attention to the tax discrepancy

"We have to recognize that there is something very wrong with our economy, because the world is growing and getting rich, but Brazil is not."  The statement was made by economist and president of Insper, Marcos Lisboa, during the seminar on Taxation in Brazil, held by the newspaper VALOR ECONÔMICO in partnership with the Brazilian Institute of Competition Ethics (ETCO), on Tuesday, July 23, in São Paulo. Paulo. The event brought together renowned experts to discuss how the tax review can contribute to Brazil's growth.

"The tax regime directly affects economic decisions and investments made in Brazil. It is crucial that we discuss tax change, as it will largely contribute to the country's growth. ” For the economist, there is already an agenda of tax micro-reforms that the Secretary of Finance can put into practice.

"First, it is necessary to correct this tax discrepancy, adjust foreign trade and end the insecurity regarding investment in infrastructure" - says Lisbon, defending that the tax rules together with the industrial and education policies are the most important factors for the
countries' growth.

CORPORATE TAX

One way for the economy to develop, according to Lisbon, is to promote the internationalization of companies. But, for that, he explains, Brazil needs to do like the countries that reduced the corporate tax to about 20%. Today, Brazilian companies are not as competitive and have less growth. It also points out that it is necessary to have greater clarity regarding infrastructure works to attract more investments, which can also contribute to the recovery of the economy.
Lisbon defends the value added tax (VAT), which is the most used in the world and can be applied in Brazil. Through it, taxation is made on the amount sold and all taxes that were paid before are discounted. Regarding the CPMF, the economist has his reservations and says that it increases the demand for money, reduces the supply of credit and generates less growth
industry.

The Taxation seminar in Brazil was held at the Tomie Ohtake Institute. In addition to Marcos Lisboa, tax attorney Everardo Maciel, former secretary of the IRS; Edson Vismona, president of ETCO and the National Forum Against Piracy
and Illegality; Phelippe Toledo Pires de Oliveira, Deputy Attorney General of the National Treasury; Roberto Quiroga Mosquera,
doctor and master in Tax Law; and Efraim Filho, federal deputy. The mediation was carried out by journalist Samy Dana, a columnist for the financial education website Valor Investe and a professor at the School of Business Administration at Fundação Getúlio Vargas (FGV).

The main highlights of the experts' discussions were the challenges of a change in taxation that would bring gains for both the State and taxpayers and provide for national development. The speakers also explained the reasons why the current tax system favors illegality and smuggling in the country, enabling consolidation
of hard-hitting debtors.

Smuggling is an evil to be fought

Tax review should prioritize productive sector and focus on weakening the illegal market

 

 

The fight against the illegal market that took over the country and expectations regarding the tax review were the main issues addressed by the federal deputy and president of the Mixed Parliamentary Front to Combat Smuggling and Counterfeiting, Efraim Filho, at the Taxation seminar in Brazil.

For the deputy, the productive sector needs to be prioritized and be able to maintain his business. “The problems are not circumstantial, they are structuring. There is a rule in the country to make life easier for the State, the collection, but not to collaborate
with the taxpayer. It is necessary to value those who create jobs and offer opportunities. ”
He questioned the fact that the cigarette sector, for example, has almost 60% of the illegal market. “We are failing to collect taxes and generate jobs. Smuggling is extremely harmful to society. ”
According to Efraim Filho, society is tolerant of small deviations, but when investigating, it is possible to see that the market
illegal finances organized crime, generates evasion of foreign exchange, loss of revenue, in addition to harming the formal labor market and offering a product without registration or control by Anvisa. “It is a game of lose lose. Smuggling inhibits business and needs to be fought. ”
For him, during the period when the country's economy was growing, contraband was not adequately combated
and settled down. However, in times of crisis, increasing losses have been a cause for concern for Brazilian companies.

ROLE OF THE CONGRESS
According to the deputy, despite the challenges, there is fertile ground to advance the discussion on tax reform. For Efraim Filho, the role that Congress assumed in pension reform should be repeated in this agenda. He says the intention is that the productive sector, the Federal Revenue and the government give their opinions so that the proposal has legitimacy.

"We have chosen president and rapporteur, the special tax reform commission is installed, but public hearings must take place so that the most diverse sectors can be heard."
According to Efraim Filho, the great challenge of tax reform is not to change the law, but to change the country's culture. “Our role is to lead the renewal process and keep our hands out for those who want to collaborate.”
For the deputy, Congress is open to receiving suggestions and making a really new proposal possible. According to him, parliamentarians need to accept opinions on the matter and call the responsibility to advance reform. “In the Temer government, the discussion that took place in the special tax reform commission left the legacy of a more mature debate. The diagnosis, therefore, is already ready. Now the focus must be on the approval of the materials. ”

Tax Reform in debate

The Taxation Seminar in Brazil was held this Tuesday (23/7) in São Paulo. The event, an initiative of the  (ETCO) in partnership with the newspaper Valor Econômico, brought together several experts to discuss the main challenges facing the country in the tax area.

Everardo Maciel, former secretary of the Federal Revenue Service, assesses that conversations about taxes in Brazil suffer from the perpetuation of some myths. "We were debating whether we should reproduce foreign models and the simple merger of taxes and we left aside the analysis and the confrontation of fundamental issues such as the excess of litigation in the system and the enormous legal uncertainty that companies face," he said.

Edson Vismona, president of ETCO, believes that the tax system in Brazil is indeed complex, but that is not the problem. “In all nations, this is not a simple topic. But in Brazil, the issue became chaotic. We have to respect the responsible taxpayer and fight the frequent debtor, simplify and rationalize the system. And we also have to carry out a thorough reform of the state in order to optimize the use of public resources ”.

According to the assistant attorney general of the National Treasury, Phillippe Pires de Oliveira, one of the points of attention is the need to control the effectiveness of the benefits resulting from tax incentive policies. "When it comes to tax reform, the sectors involved always question public officials about how they will be affected in the face of possible benefits in progress"

Marcos Lisboa, economist and president of Insper, said that tax distortions in Brazil end up stimulating inefficiency. “It happened with the CPMF, which ended up leading many companies to internalize part of the production as a way to eliminate this financial cost. But, as a rule, this ended up worsening the production process of these companies, ”he said.

Efraim Filho, federal deputy (DEM / PB) and president of the Parliamentary Front to Combat Smuggling, stressed the importance of a change in the mentality of the authorities and the population. “It is necessary not only to change the law, but the culture in Brazil, which sees smuggling as something less serious. The Brazilian needs to understand that those who dominate the illegal market today, as in the case of cigarettes, in which 54% of the products sold here are illegal, are the same groups that control drug trafficking and bring violence to the country's cities. This is a lose-lose game, which only inhibits the country's growth ”

Everardo Maciel explains why he doesn't believe in projects that suggest refounding our tax system

THE NEW SEASON OF TAX REFORM

 

by Everardo Maciel *CLICK HERE 3

Tax systems are living models that portray the complexity of economic and social relations in a society. There are many reasons against overly ambitious tax reform claims

 

The imperfection and complexity of the Brazilian tax system, which are, moreover, characteristics common to all tax systems, stimulate a profusion of plastically elegant and disruptive solutions, but which ignore the risks and costs inherent to any change.

Tax systems result from clashes that involve conflicts of reason and interest in parliaments. They are not models, applications or, in the past, works by copyist monks. On the contrary, they are living models that portray the complexity of economic and social relations in a society. They are therefore inevitably imperfect and complex.

This complexity, in turn, is increasing, because tax systems will, over time, incorporate changes - some legitimate, others not - that distort the original conception.Caption Everardo Maciel

Imperfection and complexity stimulate new conceptions aimed at refounding tax systems, in the context of an improbable and little useful idealization.

Peremptory statements are frequent that denounce the complexity, inefficiency and regressiveness of the Brazilian tax system, without there being a minimally consistent debate on the matter.

There are many possibilities for qualifying complexity. What makes a tax system truly complex is the overload of bureaucratic requirements, the profusion of special regimes and the indeterminacy of concepts and procedural delays that lead to legal uncertainty.

Issues such as number of rates or taxes and overlapping incidences are easily overcome by using good computer applications.

Problems exist and will always exist, which is an excuse for continuous action focused on strategic matters, aiming at eliminating or mitigating them.

The problems of ICMS and PIS / Cofins are remedied with surgical changes.

There are many reasons against overly ambitious tax reform claims.

Changes have costs and risks. Normative stability, in the tax sphere, is a relevant asset for deciding on private investments.

In an interview with Veja (27/09/2017), Eldar Saetre, president of Statoil (Norwegian state oil company), stressed that his major concern in relation to Brazilian taxation was unpredictability. He added that, in Norway, the taxation of oil activity was high (78%), but stable.

In an interview with the Financial Times, published in Valor (28/04/2017), Warren Buffet, one of the largest investors in the world, said: “People invest when they think they can make money, and not because of taxation”.

In addition, there are risks to the treasury and the taxpayer. Any change has repercussions on tax rates and tax bases, in an unpredictable way and differently on taxpayers.

Ultimately, major changes can take on an adventurous character. Anyway, systems, like the tributary, are only well known with real mass.

In everything, we cannot forget our undying vocation to copy models from other countries, built under peculiar circumstances and different from ours. It is cultural servility, opposite and equally mediocre of xenophobia in the field of ideas.

The most serious thing is that we seek to copy models in frank obsolescence, such as the Value Added Tax (VAT), which is complex, vulnerable to evasion (the carousel or banknote ride is a well-known evasion modality in Europe) and unable to assimilate properly the digital economy.

It is good to pay attention to what is being discussed at the border of tax policy. With a solid academic basis, the United States is already discussing the formulation of a model for taxing consumed income, which aggregates VAT and Income Tax characteristics, innovating them.

Meanwhile, in Brazil, little or no attention is paid to our most severe tax illnesses: bureaucracy, conceptual indeterminacy and the tax process.

Bureaucracy reigns triumphantly in the tax system. Its pearls are multiple registration, negative certificate requirements, tax refunds, obstacles to compensation, etc.

It is certain that conceptual indeterminacy will always exist, demanding the clarifying intervention of Justice. After all, there is no closed concept system. What is reprehensible is exaggeration.

We have not yet pacified concepts such as billing, gross revenue, indemnity for tax purposes, irregular dissolution of companies, joint liability of partners, tax substitution, abusive tax planning, etc. It's an absurd.

The process, from launch to execution, is exquisite in its slowness and inefficiency.

In the Union, the amounts under administrative and judicial discussion added to the credits recorded in active debt correspond to more than double the annual tax collection.

A report produced by the National Council of Justice (CNJ) shows that of the impressive 80 million cases pending in court, approximately 30 million are related to tax enforcement.

Although it contradicts the bureaucracy and the litigation industry, the real reform is to eliminate these tax illnesses. However, it lacks the charm of designing a new, unpredictable and unnecessary tax model.

Ambitious claims, by exacerbating tax conflicts, including in the context of fiscal federalism, always end in impasses, in addition to removing the focus of Brazilian tax illnesses. It is worth remembering Einstein's teaching: “it is insanity to keep doing the same thing and expect different results”.