Taxation archives - Page 4 of 15

Wealth destroyed by crime

Brazil has become a breeding ground for smuggling and arms and drug trafficking. Combating such illicit activities involves simplifying taxes

The country has become a fertile market for smuggled and pirated products. Not by chance, it has become the largest global market for illegal Roma. The cigarette of our neighbor, Paraguay, already occupies 48% of the entire national market, a record number that brings enormous damage to the Brazilian economy.
The problem is aggravated because this crime does not come alone. It harms local commerce and industry, reduces tax collection and jobs, increases health risks and encourages organized crime and drug and arms trafficking. Facing the problem requires a tax review so that the sectors, heavily taxed, and which suffer a great impact from smuggling, can remain standing.

The imbalance in regional taxation is evident in the sectors most affected by smuggling and piracy, such as fuel and tobacco. While the tax burden on cigarettes is 16% in Paraguay, the lowest in the world, Brazil, Argentina and Chile charge 70% to 80%.

“The whole world argues that it is necessary to have a higher tax on cigarettes in order to fight consumption. Paraguay ignores this. Hence the regional imbalance. We are encouraging smuggling. The suggestion presented in the last convention of the World Trade Organization (WTO) is the equalization of taxes between Brazil and Paraguay, since the current difference stimulates illicit trade ”, says Edson Vismona, executive president of the Brazilian Institute of Ethics in Competition (ETCO) and the National Forum Against Piracy and Illegality (FNCP).

He explains that the survival of Brazilian companies depends on the effective fight against fraud, such as tax evasion, smuggling, embezzlement and under-invoicing. “We are absolutely convergent. If we didn't have that in mind, these companies just don't survive ”, he laments. For Vismona, everyone loses with tax evasion, because billions of reais are subtracted from the treasury. The country's competitiveness decreases, since companies that pay taxes have to compete with those that pay nothing.

”It is impossible to compete. We suffer this in several situations, we have a weight to push and the others, free and loose, gain market share, but not due to competitiveness, and the country loses by reducing productive investments ”, he points out. The persistent debtor also worries ETCO. According to Vismona, Brazil is experiencing a unique situation, in which entrepreneurs, from all sectors, who are nothing more than bandits, settle in the market, already with the intention of not paying tax. The business of these entrepreneurs includes postponing, as much as possible, the settlement with the tax authorities, leaving the damage to the treasury and the taxpayers.

Only in the fuel sector, Vismona estimates that the loss reaches R $ 2 billion per year. “In the case of cigarettes, over a wider period, R $ 17 billion is irrecoverable. When the Revenue goes after, the company has already closed or changed its CNPJ, warns. There is no more room for the leitinho ”Competitive ethics and the defense of legality are foundations of coexistence, and encourage the development of any country, according to the executive president of the Brazilian Institute of Ethics in Competition (ETCO) and the National Forum Against Piracy and Illegality (FNCP), Edson Vismona.

For him, when analyzing the situation of the richest countries by the Human Development Index (HDI), it can be seen that respect for ethics, the fight against corruption and the defense of the Law guide these nations.

“If we don't have the ethical question raised, and the defense of the law as something absolutely central to our activity, we will always be left behind. And we will get nowhere. This is the basis and foundation for creating a developed country ”, he says. Respect for ethics and defense of the law should guide the debates of candidates for next October's elections, throughout Brazil. In making this defense, Vismona says that debates on taxation and economic development are “absolutely important, in the process of discussing our destiny and what we want for the country”.

“The moment is very important. Brazil needs to take a definitive turn. We are absolutely tired of, at each moment, having a period of growth and then plunging into a situation of recession, the so-called chicken flight. We don't deserve this, ”says the ETCO president.

Integrity

Vismona welcomes contributions that can raise the debate on important issues in Brazil, such as taxation and security, and that will guide, in a more concrete and consistent way, the country's future. The executive says that simplification is the magic word for the Brazilian tax system. It also emphasizes that businessmen have to respect ethical attitudes, too, since this type of positioning is a stimulus to the development of any nation.

The tax, according to the executive, is a weight chained to the feet of Brazilians. And dragging this iron ball needs to be lighter for taxpayers. “We need to provide conditions for competitiveness, expand competition and make everyone respect the same rules. This is the main content of the actions in which we are involved. We want to strengthen this sense of construction and respect for a country that makes us proud to participate, ”he says.

Founded in 2003,0 ETCO promotes integrity in the business environment. The Institute defends the fulfillment of tax obligations by all and the simplification of the tax system, in order to make it more transparent and less costly to all taxpayers, in general.

Taxes may increase, says Raul Velloso.

For economists, without cutting spending, the public sector will run the risk of having to raise or tax citizens more

It is good that all Brazilians prepare, because the next government should be pressured to raise taxes, to balance public accounts. The alert is from the economic consultant, Raul Velloso. “It will be a disaster if that happens. But we cannot ignore that there is an economic moment to dictate things. And this economic moment shows that the country is plunged into a huge fiscal imbalance ”, he says.

In view of the difficult situation that government accounts are currently experiencing, with successive deficits since 2014, anything is possible. The prospect is that public accounts will only return to blue in 2021, at best. According to him. the debacle of the government's fiscal situation began in 2010, when the collection of the Union in relation to the Gross Domestic Product (GDP) started to fall. Revenues (before GDP) started to collapse even before the recession hit the scene. And spending continued its upward trend, ”he says.

ForVelloso, the government's fiscal situation is one of the most difficult that the country has ever been through. And making use of the tax increase will be an alternative for the government that will take office next year. The gap expected in this year's accounts is R $ 159 billion. “Nobody agrees to do the other things that could be done. Today, we have the greatest fiscal imbalance in our history, and a situation with a lack of willingness on the part of political leaders to face this, on the side that has to be faced, which is the expenditure side ”, he asserts. In the economist's opinion, it is natural that, to remedy the fiscal deficit, the government brings to the table the discussion of a new round of tax increase. “The problem is that you can't move spending in Brazil. It's impressive". To try to change this situation, he summons entities, such as the Brazilian Institute of Competitive Ethics (ETCO), and society in general, which calls for a lower and better quality tax burden, “for an effort to control and reduce public spending”.

“I repeat, the fiscal imbalance is huge. There will be pressure to increase the tax burden. I cannot say at what moment, but it will certainly come in the next government, because now it is more difficult ”. states. Such a joint effort needs to involve “truly innovative solutions. The effort to improve public spending cannot wait ”, says Velloso. In his opinion, it is necessary to look forward, because if the country is simply raising old problems and not facing the question of the need to cut government spending, the bill will come the easiest way: the high tax burden.

Source: Special section Correio Braziliense, Taxation and Economic Development (14/03/2018)

To grow, Brazil needs to simplify taxation

Brazil may have come out of the recession, but it will only be an internationally competitive economy if it changes its tax legislation. At the seminar Correio Debate: Taxation and Economic Development, authorities and experts in the field agreed that the charging model needs to be changed, making it less complex and distorted. In the assessment of the Federal Revenue Secretary, Jorge Rachid, who opened the event, the simplification of taxes enables economic development. Authorities and experts in the field agreed that it is necessary to change the charging model, making it less complex and distorted. In the assessment of the Federal Revenue Secretary, Jorge Rachid, who opened the event, the simplification of taxes enables economic development.

He stressed that it is necessary to eliminate deficiencies, anomalies and distortions in the Brazilian tax system. "The current situation has a negative evaluation, no doubt," he guaranteed. "The proliferation of subsystems and regimes fragments the tax system".

PIS-Cofins

One of the 15 priority measures in the government's economic area, the proposal for the reformulation and simplification of the PIS-Cofins is ready and should be sent “soon to the National Congress”, said the Federal Revenue Secretary, Jorge Rachid, after a seminar at Post office.

The project is worth changing the form of PIS taxation first. After testing the new rate, which should last about a year, the idea is to proceed with the unification of these systems with Cofins. "Tax change is a process," he said. According to Rachid, the rates will be disclosed in the presentation of the proposal. In due course, when we formalize the proposal, these numbers (rates) will appear, he added. This, for him, is the result of a decentralized tax policy, which allows states and municipalities the autonomy to create taxes, fees and contributions.

The “ideal” tax reform, according to the Federal Revenue Secretary, would create a single consumption tax with centralized collection in the federal government. Which, in his opinion, is a process that should not be carried out. "That is why we are committed to correcting the distortions in the PIS-Cofins, unifying them in the long run," he said.

The change in the tax system is one of the guidelines that Brazil will need to play in order to join the Organization for Economic Cooperation and Development (OECD), as is in the government's interest. But analysts of the Brazilian tax regime say that it is necessary to do more than a simplification.

Ana Frazão, lawyer and professor of Civil Law at the University of Brasília (UnB), argues that it is necessary to end tax privileges. given to certain sectors of the economy, as this creates an uneven system and contributes to the concentration of income.

In addition, the expert argues that the State should be the first to comply with the legislation, which it has not been doing, contributing to the practice of evasion.
Ana Frazão criticized the Special Tax Regularization Program (Pert), better known as Refis, which was approved by the National Congress in 2017, giving discounts of up to 90% and splitting corporate debts. The text of the provisional measure (MP) benefited irregular companies. “I imagine a businessman who is even correct, who pays taxes correctly, feeling obliged not to pay (taxes) to remain in the market. Well, how will you compete with someone who is not subject to the same tax burden? ”, He asked. "These installments harm taxpayers who pay taxes on time," agrees the Secretary of Revenue. Rachid stressed that the tax authorities are working to identify frauds intensively. Of the total tax procedures, 25% result in the discovery of irregularities. "We have to identify the mechanisms that intentionally aim to avoid paying taxes," he commented.

Irrationality

Rachid considers that there are several fiscal incentive policies that did not achieve the objectives and favored the deficit in public accounts. He classified some of these programs as tax irrationality, such as the exemption from payroll, a practice that the government is trying to reverse in the National Congress. Another criticism made by the secretary to the current tax system is the differentiation of product charges. “The refrigerator for administrative rooms does not generate (tax) credit, but for production rooms it does. This ends up causing legal uncertainty ”, he exemplified. “When the investor arrives in Brazil, he has to ask a series of questions, including which product he manufactures and, depending on, will have a different tax burden.

We have to correct this distortion. This is not correct ”, he added. The tax consultant and partner-president of Logos, Everardo Maciel, said that there are exaggerations in “extrafiscalidade”, which is the term used to explain the taxation to “induce conduct”. He exemplified the issue with the case of cigarette taxation in Brazil.

In Maciel's opinion, the government “got it wrong” by significantly raising taxes in the sector to try to curb smoking. "Once they start to exaggerate, they provoke reactions," he declared. “In practice, people will not stop smoking. This is not the correct way to induce this conduct. People go to smuggling, ”he added, noting that this generates a significant and growing presence of the irregular product coming from neighboring countries. "It is no use having a tax that encourages this type of criminal behavior", he added.

by: Hamilton Ferrari

Correio Braziliense Newspaper / 07-03-2018

In an article published in Correio Braziliense, ETCO's president talks about the harmful effects of the heavy tax burden

The shot in the tributary foot

Article published in the Correio Braziliense newspaper on 07/03/2017

When it comes to tax burden - the level of taxes paid in relation to the country's wealth -, the latest information available, referring to the year 2016, indicates that it amounted to 32,38% of the Gross Domestic Product (GDP). In other words, of all that the country produced, 32,38% ended up in the coffers of governments in the form of taxes, in its various forms (taxes, fees, contributions, etc.). The year 2016 marked a sequence of three consecutive annual increases for this indicator.

The result is actually a photograph of very different situations, consolidating an average. In some sectors, taxes rise more, others even reduce them at different times. It is true that a wide-ranging transformation of the tax system, so demanded by the productive sector, is perhaps the most difficult to be accomplished, so many are the interests of the municipalities, states and the Union involved in the issue. The great difficulty is being able to articulate a consensus to move forward.

While Congress is not doing its part, some cases call attention to the disastrous effects that raising taxes can have. With the eagerness to raise more, the government often does not realize that it is shooting itself in the foot, reducing the collection and fostering the illegal market.

This is the case of the tobacco market in Brazil. Currently, the tax burden on the formal cigarette industry is 71% on average, reaching, in some cases, almost 90%, a rare rate for any type of product.

If the government's idea is to tax to reduce consumption, for the sake of public health, it is a shot in the foot. And if the intention was just to increase the collection as a whole by heavily taxing a “superfluous” product, it is a shot in the other foot. In both cases, the reason is the same: the increase has not even reduced consumption, nor has it contributed to the increase in revenue.

To understand why the effect did not correspond, until today, to what the government imagined, it is necessary to go back in time.

Over the past few years, there have been disproportionate tax increases in the formal cigarette industry: from 2011 to 2017, the IPI for cigarettes rose 140%, compared to inflation of only 44%, by the IPCA. In the same period, 19 state governments increased the ICMS tax rate on cigarettes, with an average increase of five percentage points in the rates practiced.

And what was the effect? The disproportionate tax increases contributed to increase the difference between the average prices practiced in the formal and illegal markets, encouraging smuggling and the installation of tax evasion industries in Brazil.

Quickly, a significant part of the consumption that existed from the formal industry migrated to the illegal market. Contraband and the illegal cigarette produced here dominate 48% of the Brazilian market. In other words, there was no big reduction in cigarette consumption, only the “share” changed - smuggled cigarettes, cheaper, started to be consumed more and their brands are the leaders of our market. And this is just one side of the issue: on the other we have that the tax collection base was severely deteriorated, in 2017 tax evasion reached levels close to 45%.

In real numbers, an evasion of 45% can be estimated at around R $ 9,7 billion. This resource accounts for 1.6 times the budget of the Federal Police, which is responsible for fighting crime.

Today, among the three most commercialized cigarette brands in Brazil, two are from Paraguay. And why Paraguay? First, because the neighboring country is a major producer of the commodity - it produces twenty times more than domestic consumption, without, however, exporting legally to any country. But there is another answer to the Paraguayan question. There is a tax asymmetry between Brazil and the neighboring country that certainly encourages trade in illegal brands and puts the sustainability of Brazilian industry at risk. If the tax burden, as we have seen, is 71% in Brazil, in Paraguay it is no more than 16%.

Shot in the foot, shoulder and back: currently, Brazil is already the largest illegal cigarette market in the world. And it will continue to be so long as the Brazilian government does not understand that it is not by further increasing product taxes that we will have a reduction in consumption or an increase in revenue.

* Edson Vismona, president of ETCO - Brazilian Institute of Competition Ethics

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New ICMS overloads e-commerce

Law that changes charging in interstate sales brings bureaucracy to companies; for OAB, inclusion of Simples companies is unconstitutional

The change in the collection of ICMS in non-face-to-face sales between two states, in force since January 1st, has created a major headache for e-commerce companies, especially small businesses. With excess bureaucracy and rising costs, many entrepreneurs across the country are stopping selling to other states or even ending activities. Before, the tax collected in each operation was only with the State of origin of the product. With Constitutional Amendment 87/2015, the ICMS is now shared with the State of destination of the sale. Thus, the entrepreneur now needs to open tax registration in each of the States and make the monthly collection in a specific guide or collect a National Guide for the Collection of State Taxes (GNRE) for each sale made to each consumer outside his State.

Source: The State of São Paulo (14/02)

To read the full story, click here

ETCO holds workshop to discuss change in Simples Nacional

The event was attended by the Federal Revenue Secretary, Jorge Rachid, and tax specialists

The ETCO-Brazilian Institute of Ethical Competition held in São Paulo, on February 15, the workshop A Ampliação do Simples Nacional. The event brought together business representatives, tax administrators and economists specialized in taxation with the aim of analyzing the Bill of Law of the Chamber (PLC 125-2015) that expands billing limits and introduces changes in the rules of Simples Nacional and Individual Microentrepreneurs (MEI) .

The meeting included lectures by the Federal Revenue Secretary, Jorge Rachid; Luciano Garcia Miguel, representing the Finance Secretary of São Paulo, Renato Villela; economist Bernard Appy, director of the Center for Tax Citizenship; and economist Fernando Holanda Barbosa, from the Brazilian Institute of Economics of the Getúlio Vargas Foundation (Ibre / FGV). The four speakers criticized the text of PLC 125 that is about to be voted on in Congress.

The mediation was by ETCO president Evandro Guimarães, who explained the objective of the meeting: “Brazil needs to better understand what is being proposed in this PLC, what are the impacts on the business environment and on the country. Our intention was to bring together subject matter experts to share their views and help deepen that understanding ”.

The following are some of the main points of the project and the criticisms of the speakers:

1) Progressive expansion of the revenue limit to fit into the National Simple from the current R $ 3,6 million to R $ 14,4 million in 2018 for federal taxes (for ICMS, state, and ISS, municipal, the limit remains at R $ 3,6 million).

Second Jorge Rachid, this expansion will cause an annual loss of R $ 16,1 billion in federal revenue as of 2018, an opposite effect to the fiscal effort necessary to balance public accounts.

In the opinion of bernard appy, even within the current limits, Simples Nacional does not fulfill one of its initial promises, which was to favor companies that suffer the most from unfair competition from the informal economy. These companies usually have a low profit margin, which makes it impossible to join the program, which calculates the tax on billing. "Simples benefits those who need it least, which are companies with a high profit margin and entrepreneurs with high personal income," he said. According to him, the expansion of the billing limit will further increase this distortion.

According to a Fernando Holland Barbosa, no other country in the world has a benefit program for small businesses with a limit as high as that of Simples Nacional today. He says that the tax waiver of Simples reached R $ 2015 billion in 72,4. "The project is expensive and has had little impact on its purpose of reducing informality," he said. "The increase in the limit will only worsen this situation".

Although PLC 125 maintains the billing limits for ICMS and ISS at R $ 3,6 million, the São Paulo government representative stated that the increase in the limit for federal taxes will cause a reduction in federal transfer funds to states and municipalities. "There will be significant losses in these transfers," he said Luciano Garcia Miguel. The IRS estimates that the reduction could reach R $ 7,5 billion per year from 2018.

2) Increase in the Individual Microentrepreneur (MEI) billing limit from R $ 60 thousand to R $ 90 thousand per year

The Economist bernard appy finds raising the MEI limit “unnecessary and unjustifiable”. He sees a contradiction in the criteria that tax salaried workers and MEI participants. “Those who work with a formal contract and earn R $ 5 are taxed in the highest income tax bracket, 27,5%. If you receive the same amount as MEI, you pay 1% tax ”, he compared. "Brazil needs to decide if those who earn R $ 5 a month are rich, as they think the Income Tax is, or if they are poor, as the MEI proclaims."

The São Paulo tax representative stated that raising the limit will reduce the tax revenue of states and municipalities. "The state of São Paulo will lose R $ 100 million a year", said Luciano Garcia Miguel.

3) Inclusion of part of the alcoholic beverage industry and wholesale trade in Simples

The Secretary of Revenue foresees a reduction in tax collection in this segment. Second Jorge Rachid, companies in the sector, which today pay high rates, should opt for Simples Nacional to pay less taxes and may even split into several companies to remain within the required billing limits.

The Economist bernard appy cited another loss. According to him, in the beverage segment, taxation also has the function of controlling demand. Lower taxes encourage alcohol consumption.

4) Inclusion of small credit companies in Simples Nacional

The four speakers stated that this inclusion will represent the legalization of the loan without control by public agencies. "It will be the institutionalization of loan sharking", criticized the economist bernard appy.

The Economist Fernando Holland Barbosa he pointed out that PLC 125 does not establish an interest limit or control by the Central Bank on loans offered by the benefited institutions. "An absurd", he lamented.

Commission approves single rate for microenterprise in tax substitution

The Commission for Economic Development, Industry and Commerce approved a Senate proposal (PLP 45/15) fixing the rate of 3,95% ICMS of products subject to tax substitution acquired by companies included in the Simple national. The complementary bill amends the General Law on Micro and Small Enterprises (Complementary Law 123/06).

The text received a favorable opinion from Deputy Laercio Oliveira (SD-SE). Currently, micro and small companies subject to the tax substitution regime pay the same rate as the productive chain in which they operate.

For Oliveira, this penalizes these companies, which do not have the same cash volume as the large companies in the chain. The project, according to the rapporteur, meets the constitutional principle of differentiated and favored treatment for micro and small businesses. The text also prevents the tax substitution from canceling the benefits of the Lei do Simples.

Refund
The Senate proposal also changes the Kandir Law (Complementary Law 87/96) to include a new ICMS refund hypothesis in cases of tax substitution, to benefit micro and small companies.

Today, the law guarantees these taxpayers the right to a refund of value when the presumed chargeable event (the sale) does not take place. The project also provides for compensation when the sale is made on a calculation basis lower than that estimated by the State Finance Department. In other words, if the micro company pays a higher tax than that estimated by the secretariat, it will be entitled to the difference.

For deputy Laercio Oliveira, the wording of PLP 45 “gives greater security to micro and small companies, in addition to reducing the tax impact”.

Fuel sector
Oliveira introduced an amendment to establish a compensation rule in the fuel and lubricants sector in interstate operations, where there is tax substitution. According to the approved text, the taxpayer may, at his discretion, receive reimbursement immediately or write the credit in his tax document if the request for compensation made to the Treasury Department is not resolved within 90 days.

The amendment also determines that, if the request for compensation is denied, the taxpayer will reverse the launched credits, duly updated, with the payment of the applicable legal additions.

Conduct
The project will now be analyzed in the Finance and Taxation commissions; and Constitution and Justice and Citizenship. If approved, it goes on to vote by the Chamber Plenary.

Source: Agência Câmara (29/01)