One of the most sensitive matters nowadays on the national environment is the crucial debate at the Parliament on how the country can revert still in 2020 its major weakness turning it into a leverage spotlight before the international business community: decrease of tax burden with operational and cash flow gains allowing Brazil to be competitive again in foreign direct investment capture and its endurance down here.
In short, please check out the 9 topics which every entrepreneur needs to know and understand about Brazilian Tax Reform:
1. Status of the current tax levy is high if compared with other developing countries: excise collection consumes 33,1% of Brazil GDP while South Africa, Colombia, Mexico and Indonesia strike 28,4%, 19,4%, 16,1% and 11,9% respectively;
2. Needy taxpayers have their income more exposed to tax charge then rich people: families who earn up to two minimum monthly wages do forfeit 53% with taxes while those who get more than 30 minimum monthly wages do forfeit 29% only. The reason for that is because consumption is more heavily taxed than income itself;
3. Collection complexity is one of the highest worldwide ranking Brazil in the 184 position within 190 economies. There are more than 90 types of taxes when federal, state and municipality levels are summed up. In terms of rules the impressive figure exceeds 400.000 laws which have been enacted since the Constitution of 1988. There is no uniformity amongst economic sectors and companies which generates regulatory uncertainty and subjects 71% of GDP to court or administrative dispute;
4. Three Bills are under debate at the House of Representatives focusing the extinction of five types of taxes on consumption only equivalent to 12,5% of the whole local collection and do imply in more than 71.000 administrative complaints before the Brazilian IRS and the Board of Tax Appeals;
5. None of the Bills consider to extinct taxation on income or reduce its rates, but the purpose, on the other hand, is to easier the tax collecting system which has been twisted along the years;
6. There is a chance for services to be affected by an increase of tax levy and the industry being relieved due to a minor reduction of excise burden;
7. Waste of time to calculate the amounts to be collected to the Government. World Bank has pointed out (Doing Business Annual Survey) that the Brazilian Industry with about 60 employees takes 1.501 hours to calculate all due taxes, of which 885 only to determine ICMS (kind of VAT) charge. In Uruguay, a company under the same conditions, do take just 163 hours for that purpose;
8. Benefits may be not perceived at short term because the deadline for the new legislation to come enforceable can take from 6 to 10 years; and
9. Efforts to gather three Bills into one are under development at the House of Representatives with the aims to send it to the floor for final voting (House and Senate) previously to next November county elections.
If you would like to know more about that matter please contact Fischer Law Firm and we will be honored to perform joint efforts pursuing to render the customized support you are looking for.