Source: The State of S. Paulo (São Paulo - SP) - 04/06/2012

The federal government did well when it abdicated from presenting comprehensive tax reform proposals, preferring solutions focused on specific problems. Experience clearly demonstrates that these types of reforms lead to the maximization of political tensions, resulting in the failure of the claim. Complete restructuring of tax systems only occurs in exceptional situations, such as acute crises, institutional disruptions or wars.

Everaldo Maciel - Tax consultant, was Secretary of Federal Revenue (1995-2002)

The rejection of comprehensive fundamentalism cannot, however, mean the triumph of casuistic reforms, resulting from responses to circumstantial problems or from concessions to less virtuous lobbies.

The casuistic reforms generate a risky climate of tax voluntarism, in which the tax becomes a solution to all problems, without realizing that it can become a problem for all solutions.

Therefore, there is no free extra-tax exercise. Precisely for this reason, the doctrine enshrined neutrality as one of the basic principles of tax policy, although subject to articulation with other equally relevant principles. If the intransigence regarding the use of tax incentives represents a dogmatism of little use, the abuse in the use of this institute is a territory of complexity, where tax evasion, illicit planning and, almost always, corruption prosper.

By replacing the payroll with gross revenue, on the basis of calculating the employer's social security contribution, the tax authority took a wise step in order to relieve exports and overcome the antagonism between employment and tax.

It was also prudent to restrict the change to those sectors where the payroll had a significant weight in the respective costs. This prudence is justified, because the effects of a new tax model are never completely predictable. The tax authority erred, however, when it admitted the coexistence, in the same company, between the new and the old regime, resulting in a complex and vulnerable tax syncretism.

The enormous instability in tax rules is extremely damaging. By mere common sense, it is known that economic uncertainties cannot sanction complete tax unpredictability, just as the duty to react to what is adverse does not authorize temerity.

With each increase in the stock of automobiles in the car parks, it seems unreasonable to create transitional regimes, with a lower Tax on Industrialized Products (IPI). This policy is capable of generating important perverse effects. It was she who, combined with a careless credit policy, made traffic in our cities unfeasible, as it is undeniable that the Brazilian urban fabric is not designed to receive a large number of cars, not to mention the recognized precariousness of public transport.

In the case of the city of São Paulo, in the face of constant traffic jams, a good-natured observer suggested replacing the IPVA tax on vehicles with the one on real estate.

The return to normal car taxation causes paralysis in the market, waiting for a further reduction in the IPI. Something similar to what happens with some taxpayers who opt for default in the hope of future amnesties.

The Tax on Financial Operations (IOF) changes from time to time. The only certainty, then, is that it always changes. It is evident that it has a regulatory function, in spite of its growing collection role. But this function cannot be used as an excuse for its conversion into an airport windsock.

PIS and Cofins have become a stick for every project. For each project conceived by a luminary on duty, a tax benefit regime is created for those contributions. Such regimes are associated with requirements, for which the public administration is not qualified to verify compliance. Usually, they are extinguished due to scandals.

Today, neither the tax authorities nor the taxpayer are aware of the PIS and Cofins legislation. It is a patchwork quilt that does not fit in a regulation.

In order to face circumstantial problems, the PIS / Cofins maturity was postponed for some sectors (textiles, leather, shoes, furniture, auto parts), from April and May to November and December next. A dangerous precedent has been set.

It is true that, for many reasons, those sectors are in crisis. What does it mean, however, to understand that, at the end of the year, they will overcome the crisis and be able to pay past and current taxes? A window for remission or further extension is already foreseen.

Furthermore, with what authority can the benefit be denied, at another time, for the same or other sectors in crisis? All of this is reminiscent of the sad times when the date of delivery of the Income Tax was not known.

Problem-centered tax policies can be correct and realistic, and please the beneficiaries. However, they run a serious risk of raising the level of uncertainty or subjecting decisions to imperial preferences of the government.

Source: The State of S. Paulo (São Paulo - SP) - 27/05/2012

A few days ago, President Dilma Rousseff promised to make the tax reform with a new model of action: instead of announcing, it will execute; instead of a global proposal, one-off measures. In Lula's administration, the government spent years negotiating with governors and parliamentarians, cutting back and forth, accepting to deface and diminish the initial proposal until it was reduced to the unification of the ICMS only. Still, he gave up sending the proposal to Congress, because it would be rejected on the spot. Dilma got tired and will follow another path. He gave the electricity tariff as an example, which he promised to exempt from taxes. He announced, but so far has not executed. 

His finance minister seems to have understood the message this way: tax reform needs to be punctual, pragmatic and flexible - it exempts the tax today and raises the rate tomorrow, according to the current situation. And the tax structure remains intact, unchanged. If the automakers' yard is full of automobiles, the tax is cut, the industry sells, spills inventories and three months later it returns to what it was before. If there are other industrial sectors stocked and with production falling, get businessmen and workers with political pressure in Brasília. As is the auto industry.

Tax reform can and should be sliced, as the president wants. It did not advance in the FHC and Lula governments because it followed a wrong ritual, of trying to negotiate the whole, giving rise to political bargains with one and the other tax that rendered it harmless at the end of the negotiation. But it is absolutely essential that it be considered as a whole, reducing not only the tax burden, but also the amount of taxes, seeking simplification, facilitating collection and collection and making tax evasion difficult.

It is not possible to reform while maintaining the same tax structure, without correcting a system that has become a monster precisely because momentary blows have overcome fiscal rationality since the days of the military dictatorship. To put it more clearly, in the last 40 years a tax was created whenever the federal budget opened a new hole, generated by successive governments that spent more than they could. That was how the federal PIS-Cofins were born, the nine taxes included in the electricity bills, the municipal fire tax and so on. And the taxpayer continues to pay to support increasingly expensive governments. And the industry continues to lose, more and more, competition power.

The pragmatic style of the Dilma government is welcome at the right time and in the right situations. The problem is that the economic team mixes garlic with strips and confuses tax reform with temporary exemptions. Instead of perfecting regulation to encourage private investment in infrastructure, it fills the BNDES 'cash with subsidized money to finance consumption-oriented production. The immediacy hides the real problem.

Dilma needs to be advised by people who think further, who see the country's structural dilemmas, the bottlenecks that hinder growth, stifle productivity and weaken the industry's competitiveness. This will not be solved with episodic relief and addressed to only one industrial sector. This momentary breath does not resolve and still leaves the rest of the industry suffering from the usual ills.

With the new package, there was a discussion about whether the growth model via consumption is exhausted or not, whether or not to recover growth between 3% and 4% this year. The debate is out of focus, not least because the real objective of the package was to empty the yards of the automakers and avoid layoffs of workers. It is far from being able to reverse the economic downturn. But that is the agenda that the government offers.

In a dropper of false medicines to resume growth, the Dilma government abandons the effective and true path: touching on reforms, investing in infrastructure and education for workers, reducing the cost of producing in Brazil, raising savings and investment rates . And, above all, the government saves money, rationalizes its spending and expands its investments.

Suely Caldas, journalist; is a professor at PUC-Rio