Three questions for Albérico Mascarenhas


What are, in your opinion, the conditions for reaching the end of the fiscal war?

States must find an urgent solution to the fiscal war, which is taking on huge proportions. We need to give legal certainty to the process and allow the companies' business and investment environment to flow again. It is still necessary to find ways to resolve the past, validating benefits granted, more or less as proposed in Agreement 70/14, which is very well placed when proposing a solution to the fiscal war. The difficult thing is to reach an agreement on the conditions imposed by the States for the final materialization of the agreement. This has to be rethought.


Do you believe that there is a way to materialize the 70/14 Agreement without these conditions or in some other way?

The federal government has already signaled the possibility of creating a regional fund and a compensation fund. It is necessary to discuss with the government what the limits of these initiatives are. I see no difficulty in negotiating a fund like the one intended by the States. The tax reform forecasts that depend on Congress, PEC 233/08, Senate Resolution 72, are all in progress. There is more or less consensus and convergence in the way they are being conducted. Just speed up the process in Congress. The other differences are overcome by the States. The issue of debt has been debated for a long time. I do not believe that it is a condition for the approval of Agreement 70/14.


Regarding Confaz, you said that a good part of the reform could be carried out within the scope of the council. Please explain.

 Confaz has the power to resolve most of the fiscal war. It is not so simple, but he can provide a solution to most of the issue with a simple agreement that has this objective. Another thing that Confaz can resolve is the ancillary obligations, that is, making them more rational, reducing them. The computerization of the state tax authorities is growing. This tends to decrease ancillary obligations and simplify the fiscal model. The approval of a constitutional amendment is much more complex. It depends on the consensus of two thirds of parliamentarians in the House and the Senate. In Confaz there are 27 states, 27 secretaries. Moving forward on the issue of the fiscal war, it is easier to understand all other points for simplifying the tax system, with regard to the ICMS.



Three questions for Edson Luiz Vismona

The President of the National Forum Against Piracy and Illegality (FNCP) and Instituto Brasil Legal talks about piracy in this interview.

1. What attracts Brazilians to the consumption of pirated products?
The lowest price, which is achieved by tax evasion, lack of quality and non-recognition of rights. The point that must be stressed is that this advantage is illusory, as these illegal products affect the health and safety of consumers and, due to their short durability, end up deteriorating any advantage. The famous expression is worth it: “cheap is expensive”.

2. How do you see the measures to combat piracy at the World Cup?
It is necessary to intensify the coordinated actions of the government, from our borders, ports and airports to points of sale in cities. Certainly, operators of illegality will not miss the opportunity to win with the World Cup. We need to articulate in all areas (educational, economic and repressive).

3. Is Brazil making progress in combating drug piracy? What needs to be done?
There are initiatives aimed at improving the identification and traceability of medicines, but we must speed up these actions and expand the necessary enforcement power. Always reduce the scope of criminal action.

Three questions for Edmar Bacha

The economist and former president of the BNDES talks about the expectation of economic growth, increased formalization and international competitiveness in the country.

1. With each new projection commissioned by the Central Bank, expectations for growth in the Brazilian economy for 2013 are reduced. In your opinion, what measures would be necessary to reverse this scenario?

More important than low growth is its combination with high inflation. In other words, the Brazilian economy seems to be less productive today than in the recent past. There is the effect of the end of the external bonanza, which benefited the country in the second half of the decade, but equally important is the paralysis of the liberalizing economic reforms in the Lula and Dilma governments. The resumption of these reforms is essential to allow the country to grow again with inflation under control.

2. When disclosing the 2012 Underground Economy Index, ETCO and the Brazilian Institute of Economics of Fundação Getulio Vargas (IBRE / FGV) warned of the “institutional limit” of formalizing employment. In your opinion, what factors contribute to this limit and how would it be possible to resume the growth of formalization?

The greater incorporation of labor in the formal sector of the economy was another factor that allowed to accelerate the GDP growth rate in the second half of the past decade. With the reduction of informality and the reduction of the unemployment rate, the continuous incorporation of labor now depends on the adoption of a more vigorous labor reform, in the lines that has been indicated by José Pastore, for example.

3. Mr. do you believe that the reduction of the tax burden would leverage the integration of Brazil as a competitive economy in the international scenario?

No doubt. Equally important would be a reduction in protection against imports (tariff and non-tariff barriers, especially domestic content requirements) to allow Brazilian industry to participate in globalized production chains.


Three questions for José Luiz Alquéres

Administrator of large public and private companies, national and international, the advisory adviser of ETCO talks about the role of companies in the environmental issue and the relationship between sustainability and competitive ethics.

1)    In 1972 the First World Conference on Man and the Environment, known as the Stockholm Conference, was held. For you, who actively contributed to the definition of the Brazilian position on the subject, what has changed in these 40 years?

The Brazilian position has been, in general, reactive and delayed. We almost always think that it is external interference by other countries, or people of other nationalities, to express concern about what may be happening here.

We have undoubtedly evolved, but we have not given up: “we do not accept that the environment hinders our development”. At all levels, we observe the struggle not only between ideas and concepts, but even between government agencies, around project approval.

We do not live up to the green of our flag; we should change it to brown, until we are aware of our environmental responsibility.

2)    Mr. argues that the solution to sustainability issues requires, necessarily, the greater involvement of the business sector. What reasons lead you to believe this premise and, in practice, how should this involvement occur?

I believe that we should look more at the business sector, because governments and the third sector preach in a vacuum, that is, they give statements, sign agreements and, when they get effective action, it is negative: stop something, postpone something to discuss, etc. , with few objective gains. Sectoral pacts from different business segments (starting with the most aggressive from the socio-environmental point of view) and the imposition of rules for green international trade by business initiative, for example, would be more effective actions. The truth is that environmental degradation is the result of production chains that only even producers can change and will do if, at the cry and desire of consumers, an innovative entrepreneurial spirit is combined.

3)    Is it possible to draw a parallel between business sustainability and competitive ethics? To what extent do these concepts overlap or complement each other?

Corporate sustainability - in its economic, social and environmental components - and the whole comprehensive concept of sustainability focuses on ethics that must preside over man's relations with nature and competitive ethics in men's relations with each other and with their institutions. They are, therefore, interdependent. There is no such thing as an “ethical medium” or “more or less ethical”. The “unethical”, so used colloquially, is an aberration. Whether it is or not. Do not create the fad of "fifty shades of ethics".

Three questions for Paulo Bauer

Cadu Gomes / Press Release

Senator Paulo Bauer explains, in this interview, what PEC 115/11 is, of his authorship, and talks about the reasons that led him to propose the total exemption from taxes on medicines for human use in the country.

1) What is PEC 115/11?

It is a Proposed Amendment to the Constitution that I presented in the Senate to totally exempt medicines for human use from taxes. It is worth mentioning that I got the signatures of all the other senators so that the matter could be debated in the Senate. This demonstrates that it is a vital issue for the country and, regardless of ideological positions and whether or not they agree with the proposal, senators are willing to discuss the issue.

2) Why did you decide to address this issue and what is the importance for the development of the country?

During the election campaign, in 2010, when I was preparing my proposals, in contact with voters, I felt that one of the greatest difficulties for everyone is the high price of medicines. People from all walks of life complain that too much is spent on medicines. I researched and noticed that Brazil has the sad title of world champion in the collection of taxes on medicines for human use, it is 33,9%, while veterinary medicines are only 11%. So, I promised in the campaign that I would fight to change this situation and created the PEC dos Remédios.

The approval of this initiative has several direct effects on the well-being of Brazilian society. As it is a PEC, it does not need to be sanctioned by the presidency. Approved, becomes law. It is so important that even the pharmaceutical industry has already declared support, as well as the Minister of Health, Alexandre Padilha. Today, if the doctor prescribes three boxes of medicines, the patient consumes the first, which relieves pain, the second, which generates a small improvement, but, due to the high prices, does not buy the third. The result is that, in a short time, the disease returns, people need to return to the doctor, to the SUS lines and are forced to take even more expensive medications. With almost 40% less tax, everyone will have the possibility to comply with all treatment. This generates a healthier population, fewer people in hospitals, fewer workers without working.

3) What are the expectations for approval and implementation of the PEC?

PEC is currently with the rapporteur, Senator Luiz Henrique da Silveira (PMDB), who has already proved to be favorable. He must present his opinion to the Constitution and Justice Commission later this second semester. If approved, it goes to vote in two rounds at the Senate Plenary. A new approval, and the proposal passes to the Chamber of Deputies, where it needs to be approved in a special commission that will analyze the merit, by the Commission of Constitution and Justice, that analyzes the constitutionality, and, also in two shifts, in the Plenary.

Estimating a deployment time is speculation. But, with political will, we could have the PEC becoming law until half of 2013. But, for that, it is necessary that the society mobilizes and gets in touch with its parliamentarians, asking everyone to commit themselves and vote in favor of the text, that everyone work for PEC to be prioritized, as it is a higher issue than political party issues.

Three questions for Otaviano Canuto

The World Bank vice president, Otaviano Canuto, talks about the International Seminar “The Impact of Corruption on Development” and about the fundamental points in the fight against corruption.


1) As mr. assessed the World Bank's participation in the seminar?

The World Bank has long understood the link between a fall in corruption and economic development. The opportunity to share experiences, in the company of such illustrious co-sponsors, was of great value for our work.


2) What, in your opinion, is the main impact that corruption has on world economic development?

Corruption, understood as the use of public position for private gain, distorts public spending and reduces its efficiency. Thus, it negatively affects the standard of living and the distribution of income among citizens. It affects different audiences (stakeholders) differently, with a greater impact on social segments that do not have protection mechanisms.


3) What are the fundamental points in the fight against corruption?

To discuss the issue, the focus must first be on governance. There are three basic points, which are the strengthening of institutions, which must be protected in relation to the transience of managers; transparency, which helps to hinder the misuse of resources and accountability, known as accountability. To achieve an adequate level of governance, it is essential, among other aspects, that information and data are detailed and updated and that the approach is multisectoral and at several levels.


Three questions for Hamilton Dias de Souza

The tax attorney and member of the ETCO Advisory Council Hamilton Dias de Souza gives details about the regulation of article 146-A, which entered into the Federal Constitution in 2003 to allow special taxation criteria to avoid tax competitive imbalances.

How can the regulation of article 146-A establish special tax criteria?

It is not the complementary law that will define the special taxation systems. It will only create the framework within which the Union, States and municipalities will be able to discipline these issues. Especially because, it is impossible to address this issue in the more than 5.500 municipalities that we have in the country. The work must be at the state or municipal level, where each one will create or deal with the matter according to their own legislation. It is worth remembering that article 146-A is not a standard that allows the collection of taxes. It is also not aimed at the interests of the tax authorities, but rather at protecting competition and the market.

Complementary law aims to prevent competitive imbalances from which source?

The complementary law aims to prevent imbalances caused by the taxpayer and not those caused by the tax authorities or by the tax rule. If there is a tax rule that, in itself, causes a competitive tax imbalance, it will be unconstitutional. It is, therefore, a matter of curbing deviations practiced by those taxpayers who, in one way or another, systematically fail to pay and hinder the market as a whole. They do not hinder the competitor, but the competition. Therefore, it is not a problem between individuals, but what is harmful to the market and the economy in general.

How to define criteria to establish the limit of tax incentives?

The limit, in my opinion, is that of free competition. If, through a tax incentive, a State reaches the point of affecting the market, it will inevitably be able to violate the principle of free competition, which is enshrined in article 170 of the Constitution. I am not against the incentive, but I believe that the parameters must be established by general clauses and this has to be verified in specific cases. If, at present, Confaz had a system capable of ascertaining the rationale of incentives, the definition could be more concrete and adequate.

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.

Click here to access the other articles of this edition