* By Jorge Sukarie
The discussion on the need for Brazil to promote a Tax Reform has been going on for more than three decades, and although some proposals have been put forward over this period, none have been successful. Currently, the discussion has gained momentum and today we have two PECs (Proposed Amendment to the Constitution) - one in the Chamber of Deputies (PEC 45), and another in the Senate (PEC 110), in addition to the Executive's proposal to consolidate PIS / COFINS into a Contribution (CBS) through PL 3887, with a chance of advancing.
Brazil has one of the highest tax burdens in the world: currently over 32% of GDP. And, to further aggravate the scenario, it certainly has the most complex tax system, forcing companies to bear high costs with the calculation, bookkeeping and collection of taxes, in addition to the elaboration and delivery of ancillary obligations.
This environment creates a legal uncertainty that drives away investments in Brazil. Or, when they happen, they end up having an additional cost to face this tax asylum that was installed in the country. Therefore, the need for a review of our Tax System is a consensus in order to arrive at a simpler system, of easy collection and less costly from an operational point of view for companies in terms of tax collection.
However, the first question that is asked is whether this would really be the most appropriate moment to promote the tax reform that Brazil needs, considering that it will affect the collection of Municipalities, States and the Federal Government, at a time when these Federative entities are with extremely high fiscal deficit due to the expenses to face the pandemic caused by Covid-19. Wouldn't it be more appropriate for this alleged Tax Reform to come at a time of greater economic stability and predictability and, consequently, of collection, thus allowing its presumed results to have a greater chance of success?
Another point that draws attention, and which is common to the three proposals that are currently being discussed in Congress, is that they all bring a huge tax increase to the Service Sector. Despite the claim that they do not foresee an increase in tax collection, in some cases, depending on the proposal considered, the tax burden will be multiplied by four or five times to compensate for the supposed burden reduction of other sectors of the economy.
Is the Brazilian citizen willing to pay more for medical services, schools, health insurance, transportation and technology, to name just a few examples? Shouldn't we focus on Administrative Reform, in order to have a more modern and efficient State, with a lower cost for the citizen, before we promote a Tax Reform to collect resources that will pay for an expensive, deficient State, with low productivity rate?
One of the factors that has limited Brazil's competitiveness is its low productivity. And one of the most efficient ways to gain productivity is investments in technology, in innovation. Therefore, the ICT sector will be even more strategic for all segments of the economy, allowing Brazil to make the big leap in productivity it needs to stand out on the international stage.
Does it make any sense to increase the tax burden of such a strategic sector for Brazil at a time when development will be crucial to the nation's success? The discussion on the Tax Reform that the country is seeking involves answering these and other questions that will have an impact on the future of Brazil. We cannot fail to consider different sectors that, in fact, are strategic for the country, and undoubtedly the technology sector is among them.
* Jorge Sukarie, vice-chairman of the board of ABES
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