Taxation in Brazil

Considerations on taxes in Brazil

The word tribute comes from Latin and means : give, make compliments, gift. The act of paying taxes, however, was never realized, over time, by popular initiative. It has mandatory and implied criminality to fail to comply.

This difficulty in the act of tax, does not allow major changes in the essence of taxable objects. Franco (1998, p. 18) states further that "The law of least effort has had great validity in the fiscal area throughout history. Following this principle, it was first taxing it was easier to identify and charge". Thus, the tax preference historically fell in income taxes.

The Brazilian lawyer Vinicios Leoncio put the Brazilian tax law in Guinness World Records because its have 7.2 Tonne having 43.216 pages, there is another record, the time spent in calculations because the complex rule, its 2.600 hours by year, is very hard keep a business on Brasil because so complex tax rules also keeping legal, its a way to keep everyone vulnerable to government.

The Brazilian tax system is a legacy of the Empire, a period that was initially focused on taxes on imports. It had its first significant change only with the Constitution of 1934, when internal taxes on products began to gain projection. In 1960 a reform in order to increase the storage capacity of the state and increase the economic efficiency of the system was introduced. After 1960, alterations were made only in the sense of raising the storage capacity and reduce the degree of distribution of taxes between the federal entities. The end result is that the system is caught in a vicious circle, where tax rates are high and taxes are created. The Brazilian tax reality is notoriously complex, bringing a huge financial cost to the taxpayer, and also causing the constant insecurity of being or not complying with all obligations required by the tax authorities.

The site BIPT – Brazilian Institute of Tax Planning – includes data for 2006 that demonstrate the existence of about 61 taxes levied in Brazil, including taxes, fees and contributions. Further overloads the system the huge amount of rules governing the tax system, supplementary laws, ordinary laws, decrees, orders, instructions. They are in effect over 3000 standards, and the cost that companies have to comply with ancillary obligations is about 1% of its turnover. But, finally, into the endless list of human needs, those for which the state is responsible, can only be met from the collection of taxes. Moreover, the existence of tax collection is essential to maintain itself organized state.

General considerations on the national tax structure

The real growth of federal revenues grew more quickly between 1998 and 2004. Nevertheless, the differences noted throughout that period are too sharp to be explained only by higher rates. The additional variable used to explain the recent behavior of the collection, where successive records are announced, is the surveillance effort, which was significantly increased over the last ten years. The that occurred in recent years in Brazil was a move towards to raise the efficiency of the supervisory structure through increases in infrastructure, personnel and new laws.

Revenue gains with increases in existing rates are potentially higher than those that would occur with the creation of new taxes. One of the Brazilian government's objectives was, in recent years, raising revenue to reduce the public deficit, with the exchange of more complex taxes by less complex collection and can be cited as an example of this strategy the creation of the CPMF, producing significant gains. Additional gains from such exchange of taxes are obtained by more effective surveillance for less complex in terms of tax collection.

It can be seen that the level of effort made by the federal government in order to increase tax revenue, was not negligible in recent years. The increase in the number of registered companies in the outstanding debt shows the growing work of the Attorney General of the National Treasury. There is a direct relationship between revenues and the balance in charge, indicating a high degree of importance of the efforts made by the authorities in the audit.

Tax policy and social function tribute

It should be stressed how aloof are individuals before tax levies. The story of all time, is filled with expressions of displeasure about the state initiative to make tax releases, mainly because, in purely arithmetical terms, the payment of taxes produces impoverishment of the taxpayer. On the other hand, that same taxpayer is not always pleased with the way the state manages the earned financial resources. Brazil is an economy with low tax tradition, where evasion and avoidance are not suppressed with the same intensity observed in other countries with more solid tax tradition.

The relationship between the state and the taxpayer has been characterized for a long time as a relationship of power and coercion. In constitutional terms, the highlights are the principles that seek to delimit the state action. This action falls within the context of tax policy. It should be noted that the tax policy, although it consists of tax collection instrument necessarily need not result in imposition and may have tax and extrafiscal character. It is understood as fiscal policy, taxation of activities carried out with the purpose of raising, or transfer money from the private to the public coffers. The state just wants to get funding. Extrafiscal policy through the tax legislation could encourage or discourage behavior, according to the interests of society, through a regressive or progressive taxation, or for the granting of tax incentives. It can be said that through this policy, taxation activity is intended to interfere in the economy, i.e. the relations of production and circulation of wealth.

Fiscal policy may be addressed in order to provide the development of the country for purely economic goals such as development and industrialization or also to political and social targets such as greater state intervention in the private sector. The constitution provided for the species and the tax powers of each political entity. Thus, the taxes established in the policy letter should be instruments suitable for achieving the collection advocated by financial policy, so that the state meets its goals through the distribution of wealth, satisfaction of social needs, investment policies, among others, can be achieved by means of a tax policy. Such taxation, as well as their storage, are very important for the generation of expenses and care by the state, focusing on the essential needs of the population, food highlighting, health, housing, education, access to employment, free enterprise among other points.

The commitment to the economic development inserted within a theoretical dissociation with the guarantee of equality of opportunity has become latent in the Federal Constitution of 1988, establishing a duty to ensure the full exercise of citizenship within the fundamentals of the Brazilian democratic state. The text of the 1988 Constitution was a milestone, containing legal provisions committed to eradicating poverty and reducing social inequalities, prohibition of discrimination of origin, sex, race and color. In this context, the state assumed new front should those with which exercises its power, starting to design public policies committed to the enhancement of life and reducing inequalities. In this aspect the 1988 Constitution, in a leading position and effective in the economic area, takes the economic model of welfare, giving the state agent role responsible for the planning and creation of public policies for economic development linked to the promotion of economic development, in conjunction with the reduction of inequalities of opportunity policies. Within the new perspective inaugurated by the 1988 Constitution, the committed economic development with social question arises not only as a necessity, but also as state power and duty, imbued with wide autonomy to define its public policies, which brings out of tax law issues as an indispensable tool. Primarily tribute manifests itself in the form of essential burden to finance state activities committed to the creation of social policies.

Tax burden in Brazil

The first measure of the Brazilian tax burden that we know was made in 1947 and resulted in a percentage of 13.8% of GDP. Since then, the measure has been growing gradually and continuously. Yet, according to data from the Internal Revenue Service of Brazil, in 1965, the Brazilian tax burden reached 19% of GDP. With the change in the Brazilian tax system, made possible by Amendment No. 18 of 1 December 1965, there was significant growth, reaching up to 26% of GDP index. In 1986, the analysis of the tax burden resulted in 26.2% of the national GDP. The analysis of the Federal Revenue of Brazil for the year 2005 indicates the percentage of 37.37% of GDP. The Brazilian tax burden commits currently swimsuits 1/3 of the GDP share and inserts Brazil in the list of countries with the highest burdens you stand in the world, with France, Germany and Sweden, without, however, promoting the same return for the population that these countries provide.

Noteworthy in these figures the importance of indirect taxes levied on all taxpayers. Given this number, it can infer that in Brazil, taxes have high share of taxes in GDP, these numbers consistent with the levels of developed countries and incompatible with the low quality of state consideration offered, especially in the social sphere. The explicit dichotomy, obtained by analysis of the collection product in relation to the state consideration leads to the unequivocal conclusion that the high national tax revenue is lost before reaching its intended purpose. Revenue collections annually achieves record, in contrast, investments in state consideration of social services and projects experience a stagnation of the amounts invested, covering the inversely proportional to the growth path, compared to what it collects and population increase.

Application of fiscal policies committed to reducing social inequalities

The tax efficiency runs through the paths outlined in the 1988 Constitution giving the State the duty to implement fiscal policies designed to promote sustainable economic growth, committed to reducing social inequalities and assuming year posture of extra taxation. The tribute coated extra-fiscal role comes to play an important role in the economic stabilization policy, since it generates committed to social development by promoting direct investment in housing, health, welfare, job generation, among others. The creation of tax policies committed to economic development and reducing social inequalities should start in the implementation of tax justice, focused on equity re in income, and buoyed by tax constitutional principles of equality, ability to pay, progression, selectivity, essentiality, equity.

The national development and the promotion of equal opportunities are comfortable seating in the context of the tribute, as well as its collection, should be graded according to ability to pay of the taxpayer, prescribing unequal treatment for unequal, in order to minimize the differences, taxing most of whom earn more, leading the state to create a tax environment of justice committed to reducing inequality.

In this light, the constitutional principle of proportionality must be coupled with issues related to the progressivity of the tax rate, truly instituting a tax justice policy committed to the development and sustainability of the eradication of social problems, since the progressive tax is one that requires a greater rate as the taxable amount is more considered. In this feature, the tax and its collection takes prominent social function and should graduate situations due to its selectivity.

Tribute as solidarity contribution to society

The financial burden to shoulder the tax is seen as a solidarity contribution to economic and patrimonial nature, carried out by the taxpayer for the benefit of the whole society, in order to allow the State to develop their capabilities, deploying consideration mechanisms of elected service as fundamental and essential by the Brazilian Federal Constitution. Economic development can not be seen as just economic growth, its objective range expansion and macroeconomic stabilization, wealth distribution of a sponsor in favor of social welfare, adding value of human work and committed to the eradication of inequalities and ensuring existential minimum to everyone.

Fiscal policy as a sponsor of the economic and social development

The constitutional tax system should be seen as an ally engine of economic development, rather than making use of this tool, you can reverse and drive direct and indirect benefits, in order to minimize social inequalities. The result of developmental and successful social fiscal policy is expressed directly by creating jobs, improving the community's quality of life by reducing the cost of procurement of goods considered essential for the workers' social inclusion, among others several benefits.

In addition to the direct benefits of implementing fiscal policy, committed to the economic and social development, highlight deserves the indirect benefits provided by the growth of the productive sector, generating proportionally increased tax revenues for the state, which consequently re-invest these resources to improve essential public services such as health, safety, education, social security, etc.

Tribute as generating factor of social welfare

The tribute has the social function of contributing towards balancing of social inequalities, so that taxpayers receive the State of return, in terms of services. In fact, taxpayers cooperate with the sacrifice of part of its equity to the extent of their ability to pay, so that the collective interest is prestigious, seeking the establishment of a climate of peace, security and prosperity, from which everyone benefits even those who contributed nothing, for being "free," "immune" or for not arresting the capability. Thus, the tax has the power to enforce the social interest in the particular interest. Indeed, social development is sought in order to achieve full happiness of all.

It can be said that taxation is only legal forum where the product of its collection is applied in order to promote social and political development of all. Were it not for this, the act of tax revenue collection would consist of a mere act eminently mechanical, based on single and arithmetic. This simplistic act, most often than not, does not take into account the fiscal capacity of taxpayers, which invariably generates unbearable tax burden, without that community is benefited with a social service supports your financial sacrifice. The onerous tax burden is not the one who takes away a significant portion of the financial resources of the taxpayer, but rather, that it does not have the ability to promote social and political development of all, which does not result in total well-being of a community, which does not constituted in perfect instrument to achieve a fair distribution of income. There is, indeed, fair taxation if it is used to further exacerbate social inequalities. It is understood that the pursuit of social welfare also involves the tribute as strengthening element that produces the perennial strength of the economy and that enables a healthy income distribution.

Levy profile

The theory of public finance says that taxes, due to its incidence and its behavior relative to income taxpayers, can be regressive or progressive. A tax is regressive as it has an inverse relation to the level of income of the taxpayer. The reverse occurs when the tax is progressive as it increases the participation of the taxpayer as it grows your income. As the tax base, taxes are considered to be direct or indirect. In the first case, they are considered direct taxes those that focus on income and assets because, in theory, are not subject to transfers to third. Indirect focus on the production and consumption of goods and services, are transferable to third parties, i.e. to the prices of products purchased by consumers.

The collection of federal taxes on the reserve base, shows that the amount collected by the IRS of Brazil, most of the taxes taxes has the reserve base consumption, with approximately 53% on average of the funds raised by Revenue Federal Brazil and continue accounting for more than half of tax (52%) charged by the agency. This tax structure is even more perverse when we add the taxes collected by the state and municipal levels, which have the ICMS its largest source of revenue. The tax burden on consumption is regressive. In Brazil who earn up to two minimum wages spends 26% of their income to pay indirect taxes, while the tax burden for families with income higher than 30 minimum wages amounts to only 7%. Excessive taxation on consumption depresses demand and inhibits production in the country, bringing direct impact on the economy, reducing the consumption of the middle and lower income families.

Taxes that have an impact on equity in Brazil, have an insignificant collection, and the taxes on income remained virtually the same share of the total revenues, from 38.80% on average to 41.14%.

Conclusion

The state is not a simple case of "tax receiver" and "paying expenses". The role of the state is much more noble, which is to constitute an agent whose function is to make the correct reading of the immediate social needs, predict, through rigorous planning, mediate social needs, prioritize physical schedule service such expectations always in obedience to the collective will, and set a tax burden for taxpayers while respecting the principle of ability, of legality, reasonableness and other constitutional principles, considered as fundamental rights of the taxpayer.

The tax must be released and collected not only to finance expenditure that state machinery is required to hold to stay, but also as a contribution towards the realization of a just distribution of wealth so that economic progress is not the prerogative a few, and for the peace, well-being and social and the strengthening of the state is one todos.Uma guarantee low tax collection entails, in part, in the absence of a more equitable income distribution, generating growing pockets poverty and the fulfillment of social needs at levels below the minimum. The tax collection becomes important for the government, to the extent that the excess can be guided to the end that tribute must fulfill its social function, as requirements established in the Constitution or in the institution, or the collection and application of tax revenue.

Sources

• Superior Justice Tribunal. Habeas corpus no. 181636-1, the 6th. Civil Chamber of the Court of the State of São Paulo, Brasília, DF, December 6, 1994.
• Lex: STJ's case law and the Federal Regional Courts, São Paulo, v. 10, no. 103, p. 236-240, sea. 1998.
• COSTA, VR In the margins of the law: the Community Solidarity Program. On the Agenda: Journal of the Faculty of Social Work at UERJ, Rio de Janeiro, n. 12, p. 131-148, 1998.
• GOMES, L. G. F. F. Novel and Society in Brazil. Niterói: EDUFF 1998.
• Pucci, B .; OLIVEIRA, N. R .; Sguissardi, V. The night school and workers. 2. ed. San Carlos: EdUFSCar, 1995. 148 p.