The international seminar Tribute to Brazil: the reform that we want to carry out on the 29th and 30th of May and sponsored by ETCO, experts, representatives of academia, government and companies, were heard, who presented and debated on the different tax reform proposals on the agenda.
On the one hand, there are those who support a radical change in the national tax system - generalist and without patches. On the other, there are those who bet on a sliced reform, much more timid, but with arguments that, by gradually changing the tax design, the agenda would gain more followers.
Disagreements aside, everyone agrees that the 'unveiling' of a project in the National Congress would depend, solely and exclusively, on a federative pact. This means expanding the share of resources for the states and municipalities, today concentrated in the hands of the Union.
"It is necessary to rebuild the national tax system, establish principles and concepts and abandon the patches, reducing the system's rigidity as much as possible", defended FGV professor, Fernando Rezende, on the academy side during the International Tribute to Brazil Seminar, this Tuesday (30).
For him, the abundance of legislative norms of the ICMS does nothing more than speed up the administrative tax inconsistencies, which also suffer from a dysfunctional system. Other types of parallelism are also created through tax incentives, which open loopholes for the fiscal war and multiply legal uncertainty. “We are experiencing a tax surrealism”, he asked.
Rezende also defends to eliminate the multiplicity of incidences on the same tax bases, to correct the mistakes of the establishment of a dual system created by the Constituent of 88 and to seek new solutions for the solution of the federal conflicts.
On the side of the States
On behalf of the Secretaries of Finance of the Country, Paulo Antenor, leader of the portfolio in Tocantins, said that, before the reform, it would be necessary to rethink a federative pact conditioned to the approval and the creation of a pension fund that would put state finances on the axis. He also argues that the social security deficit is the answer to the fiscal crisis in the states and the return of the CPMF, necessary to restore balance in public accounts.
On the business side
Without a federative pact, the discussion is bound to fail, in the view of Dejur-Fiesp's principal director, Helcio Honda. "We need to compensate for regional inequality between states, readjusting ICMS imbalances," he said defending a single legislation for the main tax on the consumption base. Another point of the proposal would be to limit the total tax burden, a trigger used to adjust eventual breakdowns.
For ETCO's president, Edson Vismona, the expansion of the informal economy harms the productive sector that lives daily with tax evasion and evasion. "The outlook affects the purse, the competition and the consumer," he said. A new proposal, according to him, should also be anchored to a single legislation of the ICMS, PIS / Cofins.
To learn more about the proposals presented, visit movoviva.org.br
The tax voracity produces a paradox. As the values increase aiming at a higher collection, the opposite happens.
Whether in times of serious fiscal crisis and recession or even when finances are under control, the Brazilian public manager cannot resist the temptation to make the tax increase permanent. Instead of combating the old vices of waste and swelling of the public machinery and facing the privileges of corporations with strong pressure, it is preferable to sacrifice the taxpayer. No wonder, we have the highest tax burden among emerging countries.
The increase in taxes, however, is a misleading solution. Shot that can backfire. According to calculations by the Brazilian Association to Combat Counterfeiting, the country loses R $ 120 billion a year in tax collection and revenue from companies with pirated products. The biggest loss is with contraband cigarettes: R $ 4,5 billion. Then comes the auto parts sector, with R $ 3 billion; and beverages, R $ 2 billion.
Not by chance, cigarettes and beverages are among the most taxed in the country. In the case of cigarettes, the argument to protect health - in fact a concern that falls to the State - covers the furor of revenue.
But justified health care does not override the free will of the citizen who takes the risk of smoking. And do not leave the habit because of heavy taxation, using contraband cigarettes and contributing to tax evasion. According to the Brazilian Institute of Competition Ethics, the sale of contraband cigarettes in Piauí grew 16% between 2012 and 2015. In Maranhão, the increase was 17%, from 2002 to 2015.
So it is with other products. The tax voracity therefore produces a paradox. As taxes increase, aiming at greater collection, the opposite is true. In several sectors, state interventionism - taxes are part of it - does not produce good results. Who doesn't remember what happened to the computer market reserve? The law created monopolies, high costs for consumers, piracy and technological delays. Without the reserve, prices decreased, thanks to competition. Not to mention the effects in the area of public security, as smuggling is often accompanied by arms and drug trafficking.
As Finance Minister Henrique Meirelles has already stated, Brazil must be able to resolve the fiscal problem without raising taxes. At this point, then, raising taxes would be even more harmful, as experience shows that the measure accentuates the recession. To rekindle the economy, the road is longer. It is necessary to face the privileges of corporations, to convince society of the need for reforms and to combat waste. Undoubtedly laborious. But there is no better alternative.
Datafolha research, commissioned by the Brazilian Institute of Ethics in Competition (ETCO), shows that 75% of Brazilians believe that the reduction of taxes on national cigarettes would contribute to the fight against organized crime. Cigarette smuggling, mainly from Paraguay, is the one who supplies the cash and funds the activities of criminal factions, such as drug and arms trafficking.
However, the committee chairman did not say how much the tax rate will be.
The chairman of the Special Tax Reform Commission, deputy Hildo Rocha (PMDB-MA), anticipated that the final report by deputy André Moura (PSC-SE) will provide for the creation of a fund to compensate states for eventual losses in tax collection resulting from the unification the legislation on the Tax on Circulation of Goods and Services (ICMS).
Photo by: Agência Câmara Notícias - Gustavo Lima
“There is a forecast, within our global agglutinative PEC, to compensate for the state that may lose. Of course, in a change like this, someone will lose, but we are creating a Revenue Equalization Fund for no state to lose. This will come from the resources of the IPI (Tax on Industrialized Products), the Income Tax ”, he said.
Unification of rates
The unification of the rates is one of the main points of the report that, according to Rocha, will be voted on in November by the Special Committee and until the end of the year in the plenary of the Chamber. However, the committee chairman did not say how much the tax will be.
Today there are 27 different state legislations on ICMS and many states, mainly in the Midwest and Northeast, charge lower rates to attract companies to their territories, the so-called “fiscal war”.
In 2008, a substitute presented by former deputy Sandro Mabel already predicted the end of the fiscal war and the unification of the rates, bringing together several proposals on tax reform (PECs 233/08 and 31/07, among others).
The substitute proposed by Mabel was approved by the special commission but was not analyzed at the Plenary of the Chamber, mainly because it faced opposition from states that considered themselves harmed.
According to the committee chairman, there is still opposition. He guarantees, however, that most states support the measure. "Some states in the Midwest region stand against the end of the fiscal war, against the single legislation for this tax, which is one of the most complex we have," he said.
Finance Offices
The proposal for a fund to compensate states that lose revenue was presented in August, in the Chamber, by representatives of state finance departments. They defended the inclusion of the fund in the Constitution - and not through a Provisional Measure, as the government intended.
To try to reach consensus, the commission held public hearings in several states to hear the opinion of businessmen and representatives of governors. Last Monday (26), the deputies were at the headquarters of the Federation of Industries of Maranhão (Fiema), in São Luiz (MA), where they heard suggestions from businessmen.
The vice-president of Fiema, Cláudio Azevedo, said that, in general, the entity's proposals are the same as those formulated by the National Confederation of Industry: harmonization of the ICMS, IPI, PIS and Cofins calculation base, unification of the ICMS legislation and reduction of the tax burden.
IVA
In addition to the unification of the 27 state ICMS laws, the proposal that will be presented by deputy André Moura also foresees the replacement of taxes such as Cofins, PIS, Cide-Combustível and the education salary with the Value Added Tax (VAT) provided in PEC 233/08, presented by the Federal Executive.
“With VAT, what is intended is to end the cumulative nature of taxes throughout the production chain, since products are taxed even when one is used in the manufacture of another. In addition, VAT will also be shared with states and municipalities, ”said André Moura, on his personal website.
In August, at a public hearing of the commission, economist André Alencar, of the National Confederation of Municipalities (CNM), said that the unification of the Service Tax (ISS) with the Tax on the Circulation of Goods and Services (ICMS) to create a State Value Added Tax (VAT) would only be possible if there was no decrease in resources for the municipalities.
Once again canceled, the presentation of the tax reform opinion was for the next week. Today's postponement (29) was due to the lack of a minimum quorum of deputies in the special committee that analyzes the matter. While there is no vote, the rapporteur, Deputy Andre Moura (PSC-SE), continues to negotiate with the government. He says he is open to making changes to the opinion, citing the main concern of the bodies being heard, such as the IRS: the constitutional provision for tax percentages.
The deputy confirmed that he included in the opinion the need for the Constitution to provide for a maximum percentage of the Gross Domestic Product (GDP) for the tax burden in the country. Moura said, however, that he will not follow exactly the suggestion of the President of the Chamber of Deputies, Eduardo Cunha, who at the end of last week defended the limit in law, indicating that the percentage may already be valid in 2016 or 2017.
“What I imagine is that it has the percentage. Not as it was said to have 30% from 2016, but in the medium term to adapt to all the new rules exactly because of the moment that crosses the country ”, he said. According to him, the percentage currently practiced is approximately 28%, with no provision in law.
Gradual application
The rapporteur also explained that everything that is being foreseen in the text has a gradual application. The purpose is to allow time for states, municipalities and the Union to adapt to the new rules without prejudice. In the case of limiting the tax burden, the idea, according to Moura, is to define the schedule “in the medium term”. The matter is under debate with the IRS and the Ministry of Finance, which met with the deputy last week and has other meetings this week.
“My report has a lot to make law, to constitutionalize. I am constitutionalizing a lot, because it prevents the possibility of changing [the limits in the future] ”, he explained.
In the opinion, there is still the suggestion of the so-called Value Added Tax (VAT), which would replace, within eight years, federal taxes such as the Social Integration Program (PIS), the Contribution to the Financing of Social Security (Cofins) and Contribution of Intervention in the Economic Domain (Cide) on fuels. “For eight years, all taxes will converge to create federal VAT in the end. You have the time to adapt. Nothing in our report has an immediate impact for 2016 or 2017 ”, he explained.
Everardo Maciel is the new chairman of the ETCO Advisory Board
New President of the ETCO Advisory Council talks about smuggling, evasion, fiscal war and the country's bad time
Tax attorney Everardo Maciel is the new chairman of the Advisory Board of ETCO-Brazilian Institute of Ethics in Competition. He took up the post on September 1, replacing Ambassador Marcílio Marques Moreira, who has held the position since 2006. The Advisory Board is made up of prominent names from various segments of society, such as lawyers, diplomats, politicians and businessmen, and has the role of guiding the direction of the Institute.
Federal Revenue Secretary under President Fernando Henrique Cardoso and currently working as a professor and consultant, Everardo has been on the Advisory Council since it was created in 2004. “It is a huge responsibility to succeed someone with the intellectual value and importance of Ambassador Marcílio Marques Moreira, ”he says.
Below are excerpts from the interview he gave ETCO in Action.
How did you receive the mission to chair the ETCO Advisory Council?
Everardo Maciel: ETCO is a rare initiative by the business community to develop fair competition in Brazil. I have been a member of the Advisory Board since the foundation and have followed all the Institute's initiatives. My intention is to continue the work that Ambassador Marcílio has been doing brilliantly. I just want to increase the internal discussion to form or strengthen ETCO's convictions regarding the themes in which it operates. What is our view on combating smuggling? How should the Institute position itself in relation to the fiscal war? I intend to deepen the understanding of these issues within the Advisory Council, including contributions from outside experts, to help guide the direction of the Institute.
What is your view on the current moment?
Everardo Maciel: Brazil is experiencing a deep crisis, which has an important economic dimension, inserted, however, in a bigger crisis, that of values. This situation has a negative impact on the materials that are the subject of ETCO. Tax evasion, piracy and smuggling, for example, tend to increase, due to the recession. Brazil is in danger of falling back on the ETCO's interest topics.
Support for anti-corruption movements is one of ETCO's themes. How do you see the new laws that were created to combat this evil?
Everardo Maciel: I have many questions. In Brazil, there is a tendency to create laws of occasion. A problem arises, a new law is enacted, the effectiveness of which is never assessed. It is necessary to assess whether this new legislation is in fact able to reduce corruption. There is a risk of not achieving the objective and still causing uncertainties that harm the economy. The name 'Anticorruption Law' also makes this type of reflection difficult. If you ask questions, you risk being labeled in favor of corruption. We need to discuss this matter further in the Advisory Council, in order to reach a conclusion.
Why can't Brazil reduce smuggling?
Everardo Maciel: Because insisting only on the path of repression does not work. Today, I understand that there is no way to tackle smuggling without a powerful international cooperation program. I am not talking about just signing agreements of intent, shaking hands and saying that we are going to act together, but about more consistent work, which takes into account mutual interests, acts on the reasons across the border.
Are you referring to Paraguay?
Everardo Maciel: Namely, Paraguay. We will never resolve smuggling without a program that considers Paraguay's development. There are similarities to the migration crisis that we are seeing in Europe. There is no use trying to close the borders, build walls, put an electric fence. People at risk of being hit by bombs or starving to death in their countries will do anything to break through the blockade. Anyone who believes that smuggling can be solved only through repression should spend a few days on the Brazilian border with Paraguay, seeing the number of small planes that fly over the region.
Has Brazil tried to follow this path?
Everardo Maciel: When I was Secretary of Revenue, President Fernando Henrique charged me with negotiating a broad agreement with Paraguay. In a few months, we signed an agreement. Unfortunately, diplomacy follows a very slow pace and the agreement only came to be ratified by Congress already under President Lula, when circumstances were different. The Paraguayan Senate ended up rejecting the agreement.
How to reduce tax evasion?
Everardo Maciel: The solution requires simple rules and tax burden at reasonable levels. From the point of view of technology, Brazil already has one of the most modern collection systems in the world. I am proud to have participated, in ETCO, in the implementation of electronic invoices. One of our biggest problems today is not the evasion of the grocery store, but that practiced by large economic groups through illicit avoidance, abusive tax planning. Billions of reais flow through these mechanisms that the country continues to neglect.
Will we be able to carry out tax reform?
Everardo Maciel: We will not have tax reform. People dream of creating another tax system, but there are no paradigms to follow. If you put together the top ten Brazilian tax experts and ask them to create a new system, in the end we will have at least eleven different models. Tax systems are cultural models, which evolve continuously. In Brazil, there is the illusion of reformism, on the assumption that reforms are a panacea for all ills. Tax reform is not an event, it is a process.
How to solve the fiscal war?
Everardo Maciel: Fiscal war is harmful competition, violation of law. We cannot, however, confuse it with lawful tax competition, which has existed in the world since taxes were created. Brazil needs to decide to what extent it accepts tax competition. Today, we live in chaos. There are no laws, and the ones that do exist do not contain sanctions, which is the same as not existing. Unfortunately, I believe that we are far from resolving this issue, because we have not even taken the first step, which is to understand the problem. It is like the dilemma of Alice [from the book Alice in Wonderland], who asks the cat to help her find the way out, but cannot say where she wants to go. And the cat says: "In that case, it doesn't matter which way". To resolve the fiscal war, we must first be clear about what our objectives are.
The poorest municipalities in the country want different treatment in tax reform. Mayors of the so-called G100, a group that brings together populous municipalities with low per capita income and high socioeconomic vulnerability, presented demands, on Thursday (20), to the Special Tax Reform Commission.
The vice president of the National Front of Mayors for Social Policies, Elias Gomes, complained about the distribution of ICMS, which, according to him, favors municipalities with greater economic dynamism. He is the mayor of Jaboatão dos Guararapes, first on the list of the most vulnerable in Pernambuco, the state with the largest number of municipalities in this situation, 18 in total.
Constitutionally, 25% of the state VAT collection is transferred to the municipalities. The participation index that establishes the percentage that each one will be entitled to is based on the value added tax (VAF), which corresponds to what is economically produced in the municipality. "In general, the cities of the G100 have low economic dynamism, therefore, low VAF, which results in a small slice of the ICMS compared to the size of their populations", explained Elias Gomes.
Municipalities Fund
Likewise, the Municipality Participation Fund (FPM), favors smaller cities. Elias Gomes suggests changes in the distribution criteria to improve the per capita income of these municipalities.
“The tracks inside the FPM are completely oblivious to a fair distribution. For example, municipalities between 100 thousand and one million inhabitants have a certain percentage of participation, so that my neighbor with 110 thousand inhabitants also receives us, who have 700 thousand inhabitants ”, explained Elias.
“This builds inequalities. So, the staggering is less, for every 50 thousand inhabitants, and, with that, justice is done, and the tax is meaningless if it is not to finance people's lives, development, and quality of life ”, he added.
Revenue per capita
Data from the National Front of Municipalities yearbook show that the average per capita revenue of the G100 municipalities is half that of the other municipalities (R $ 1,3 thousand against R $ 2,6 thousand).
Small municipalities with up to 10 inhabitants receive up to five times the amount that the G100 municipalities receive from the FPM, per inhabitant (R $ 1,2 against R $ 250).
Likewise, ICMS revenue per inhabitant in the G100 municipalities is less than half that received by the other municipalities (R $ 219 against R $ 580).
Disordered growth
“You cannot treat unequal people equally. At this rate, we will reach the same level as the other municipalities in 100 years ”, argued Elias Gomes, recalling that the G100 is part of the municipalities that grew rapidly and in disarray in the peripheries of large cities.
“The per capita income of the municipality next to mine, which explores the Port of Suape is 1300 reais, while ours is 180 reais”, lamented the mayor of Pernambuco.
Collection
Congressman Luiz Carlos Hauly (PSDB-PR) considers that the collection of municipalities is poorly explored and suggests changes: “I personally understand that the ISS should join the ICMS and federal consumption taxes - PIS, Cofins e IPI - and make a single base and a single collection of a single national federal tax authority, of states and municipalities in society ”.
The idea, according to him, “is not for each one to have a unit, but to increase the potential of this collection, because if you are very close to the population, you cannot increase the IPTU, ISS, IPVA, but when the federal revenue increases , it is distant, it is diluted, diffuse ”.
The mayors also showed that, in relation to other taxes, the G100 municipalities are also at a disadvantage. ISS per capita revenue is four times lower than that of other municipalities. IPTU is five times smaller. And the Gross Domestic Product (TAX ID No) per capita of these cities is 1/3 of the others.
% Of the population 12
The author of the hearing request, deputy Orlando Silva (PCdoB-SP), points out that the G100 municipalities concentrate 12% of the Brazilian population and that, if treated differently, they can improve Brazil's social indicators. “We need to establish equalization mechanisms for social justice. The FPM can be that instrument ”, he evaluated.
Special service
Lucimar Nascimento, mayor of Valparaíso de Goiás and vice president of the FNP for Health Surveillance, defended differentiated service to the municipalities of the G100 with the reduction of bureaucracy to obtain financing from the BNDES. She also called on the commission to review the distribution of ICMS in the Tax Reform.
The objective, he stressed, is to provide “a new equalization that reduces the time for the G100 to be equal to other municipalities”. She recalled that, of the seven municipalities in Goiás that are part of the G100, five are in the vicinity of the Federal District, a few kilometers from the federal capital.
Carlos Farias, Secretary of Economic Development of Araçatuba, considered that the changes could be made gradually to minimize the impact on other municipalities.
The government will reform the PIS and Cofins in three stages. The first change, which should be sent to Congress later this month, will take place in the PIS. After a year of testing with the new PIS, it will be the turn of the Cofins reform. In a third stage, PIS and Cofins, contributions that finance social security, will be unified in a single tax in a model very similar to the Value Added Tax (VAT) charged by European countries.
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The international seminar Tribute to Brazil: the reform that we want to carry out on the 29th and 30th of May and sponsored by ETCO, experts, representatives of academia, government and companies, were heard, who presented and debated on the different tax reform proposals on the agenda.
