Brazil should focus on income taxes
The tax collection issues and the high Brazilian tax rates were discussed in a study by Ewaider Moreira. According to the document, the tax burden in Brazil is above all the BRIC countries and more than half of the G8 economies, according to the study conducted by Ewaider Moreira. The research also shows the current setting of other nations, such as tax increases in some G8 countries.
In an exclusive interview with Financial Executives, Eric Waidergorn, director of international consulting and BPO company, talks about possible consequences of taxes and measures that Brazil can take to improve your gathering.
Financial Executives: How the high rate of Brazilian taxes could harm negotiations, compared to other countries?
Eric Waidergorn: The tax issue in both the enhancement of product or service, and in its complexity, certainly does not facilitate the decision of small and medium enterprises to enter Brazil.
However, with the global scenario of crisis, our economic stability and consumption potential, coupled with cultural proximity to the EU and US, compared with other consumer powers such as China, India and Russia, makes us even as one of the most attractive countries to invest.
EF: According to the survey, the G8 nations have increased taxes to reduce debt levels. How did this happen?
Eric Waidergorn: The European population is aging and life expectancy is increasing, which contributes to the increase in the pension deficit. This linked to the growth of labor informality, crises in consumption and exports contribute to the increase in the public deficit to GDP ratio. The output sought by these countries, especially France (citing the G8), was to cut spending and raise taxes so they can reduce these deficits.
The cuts in public spending wherever possible is plausible. However, do not believe that increasing the tax burden is the right one of the decisions, given that the fiscal adjustment, in order to adjust the public deficit, historically is not the best solution because it slows consumption and employment and leave the goods less competitive in an international setting.
EF: What are the consequences for Brazil if tax cuts?
Eric Waidergorn: This is a complex question, because the tax reduction would benefit and harm alleged (in a more restricted and immediate vision) and therefore it is impossible to tell at a glance.
The main benefits would be related to a higher inflow of foreign investment, greater competitiveness of domestic products imported front, greater purchasing power of the population, increasing the number of formal jobs, among others. What some experts evaluate how major harm would be the lack of inflation, the heating consumption, and decreased revenue.
However, you can mitigate the effects of such misdeeds if the decrease of taxes is gradual and analyzing what economists know by Laffer Curve, which briefly is an analysis graph to find the best point of equilibrium between revenue and taxation, with a view consumption. Thus, the benefits would eventually increase the collection pulled consumption and increased employment. Although studied this curve, this increase in revenues could surpass even the immediate loss of revenue, brought about by the tax reduction.
However, Brazil’s main problem is the high taxation to consumption in indirect taxes. For taxing consumption, taxes are proportionally very different among the largest fortunes and the most needy. To better explain, the president of a large multinational pays the same tax value in the food we consume the intern company, which according to the income of these two professionals, the trainee ends up paying more taxes proportionately. This is the problem of taxing consumption.
The main exit for Brazil, compared to taxes, would focus on taxing income rather than consumption, why so allows a greater purchasing power for the largest share of the population, warming the economy. But I hear about tax reform since I was born and have never seen a feasible outcome.
EF: The expectation for this year is that the industry will grow only 0.5%. What are the causes / consequences of this slowdown?
Eric Waidergorn: The causes of industrial slowdown are linked to global consumption, which has been decreasing, resulting in slowdown in production.
An industrial slowdown scenario has always accentuated negative consequences because it is directly related to job creation, which in turn, moves the entire economy, directly or indirectly.
Brazil has been trying to counter this slowdown with palliative actions, such as IPI reduction and the reduction of interest rates and the banking spread. However, these measures can help little if no actions aimed at reducing permanently taxing the internal and external consumption.
The Brazilian scenario is not only worse because still we see an increase in production and export of commodities and products related to construction, as well as depreciation of the real against the dollar, which makes exports with a view to greater competitiveness.
EF: The forecast of GDP for this year has also decreased. What should be done so that the Brazilian economy again have good growth?
Eric Waidergorn: The Brazilian GDP is the least grows before the other emerging countries and this is not new. Immediately, Brazil is doing its part with what is possible. But the most important is to think long-term because we can not control the economy with palliative measures for specific points, but plan the long-term country with internal actions of incentive to industrial acceleration, export and bureaucracy of the country to facilitate the entry foreign investment and the opening of micro and small businesses.
EF: How the country should react if it does not recover until the end of the year?
Eric Waidergorn: Actually it should have been done for many years, which is tax reform. The problem is that Brazil does not usually think of adversity when it is in times of prosperity. We hope to get in periods of global recession or downturn to try to overcome with little effective action long-term, but palliative.
EF: What measures to reduce taxes and encourage the industry made in other countries Brazil could “be inspired”?
Eric Waidergorn: As I said before, any solution is only temporary palliative for the immediate resolution of crises and each country has its particular economic and consumer profile.
Ideally a complete tax overhaul, as acclaimed by all economic experts. I do not mean to make a striking and risky economic policy as the American New Deal, but suggesting lower taxes on consumption and production, offsetting the tax on income. Thus, the tax would be more equitable and automatically observe up the industrial heating, in all spheres.
To contain a possible overproduction and inflation, we should use a control over the long term and not attack the credit interest rates, as is being done.
(Translated by Google)
Souce: Executivos Financeiros