Company in Refis ends up with fewer jobs than the others – 06/22/2023 – Market

Companies that joined a tax debit discount and installment plan in 2014 had, three years later, an average of 6.2% fewer jobs than similar companies that did not participate in the program, known as Refis da Crisis.

The result is counterintuitive. Tax amnesties such as the Refis (tax recovery) are usually justified exactly by the maintenance or creation of jobs: the entrepreneur, by receiving cost relief, would be able to preserve or create jobs.

But that doesn’t happen, according to the study “Refis and employment: an analysis of fiscal recovery programs in Brazil”, prepared by Natalia Ferreira Rodrigues, Diego de Faveri and Gregory Michener, from FGV Ebape.

“Brazil’s general tax amnesties appear to be exceptionally bad investments of public resources,” the authors state. Among the conclusions, they maintain that programs like Refis waste taxpayers’ money that could be used in other public policies.

And put money into it. The 2014 Refis represented a waiver of R$9.4 billion in tax debts (values ​​at the time). That is, to help companies, the Brazilian State gave up trying to receive this amount.

Depending on the program –there have been more than 30 since 2000—, the amount could be even higher. Calculations on an amnesty under discussion in Congress at the end of 2021 indicated a loss of revenue of BRL 92.1 billion, more than the amount allocated to Auxílio Brasil (which is now renamed Bolsa Família).

To conclude that there was waste, Rodrigues, Faveri and Michener looked at the 62,964 companies that joined the 2014 Refis and selected 35,272 that had not benefited from previous amnesties.

Then they cross-checked databases to see which ones had complete information with the variable “number of employees” for a period of three years before and three years after the amnesty.

After applying the filters, 10,013 companies were left for analysis. They then compared them with 223,202 companies that had not participated in previous programs either, that had complete data for the period from 2011 to 2017 and were eligible for the 2014 Refis, but that, for various reasons, did not join.

The next step was to segment the companies by size –micro, small, medium/large— and, within each group, match those that had the same characteristics, such as sector, time of activity and state.

With these criteria, the authors consider that the sample of companies selected for the analysis is representative of the total universe of Refis crisis beneficiaries.

On average, those benefiting from the 2014 program ended the analysis period with 6.2% less jobs, a result driven by medium and large companies: they had almost 10% fewer jobs, while the drop in small ones was 5.5 %, and in micro, 1%.

The authors’ proposal was not to explain the detected reduction in jobs, but they suggest some hypotheses, including the possibility that amnesty beneficiaries take the money saved from taxes and invest it in assets with higher returns than their own business would have. .

A second conclusion of the study is that tax amnesties increase inequality, since forgiveness is proportional to the size of the debt. The authors show that, of the total waived with the 2014 Refis, 77.5% benefited large and medium-sized companies, although they were 27.8% of the companies in the program.

Rodrigues, Faveri and Michener state in the study: “The unsatisfactory performance of tax amnesties undoubtedly helps to explain why the development and approval of these policies occur in secret”.

LACK OF TRANSPARENCY

According to the article, there is still a big problem for the research: the lack of information about Refis and its participants. For Gregory Michener, who is a professor at FGV, the program should be much more transparent, even to curb distortions such as deputies and senators reducing their own debts.

“Entities that are using public resources for private purposes should have their names publicized. It is a struggle in several countries”, he says, although he recognizes that the debate is not easy, as it involves data protection and commercial issues.

Easier, in the view of the authors, would be to ensure greater public participation in the elaboration of Refis. Most of the time, the program has been created by means of a provisional measure or the so-called tortoises – rules that piggyback on projects on another subject.

This was the case of the 2014 Refis, part of the project that converted into law a provisional measure on Inovar Auto, an incentive for the car production chain.

Hasty processing and a general lack of transparency produce another problem: The government does not usually analyze debtors’ ability to pay, allowing the amnesty to benefit companies that would not need it, according to the study. Law 13,988/20 sought to correct this failure, but it is still too early to say whether it was successful.

From the government’s point of view, it is common for amnesties such as Refis to be used for an immediate increase in tax collection. In the medium and long term, however, the effect is the opposite, as they know that, sooner or later, there will be a new discount program and favorable conditions for repaying debts.

“Several international organizations have already studied the behavioral problem that exists when instituting amnesties too often”, says Natalia Rodrigues, who is a prosecutor at the National Treasury and holds a master’s degree in public administration from FGV.

“The entrepreneur stops paying to be able to join a future program, so he will pay less than if he had paid on time. This effect erodes the collection”, says the researcher.

That is why the IMF (International Monetary Fund) recommends that installments, if offered, be limited to a period of 12 to 24 months. In Brazil, the 2014 Refis granted up to 180 months, or 15 years – a standard here.

wanted by Sheetthe Federal Revenue said that there are no new Refis under analysis at this time.

The agency stated that this type of program “is an adequate instrument for maintaining jobs and economic activity”.

The Revenue, however, specified that the Refis must be destined to companies in momentary difficulties and that, “when granted in an unrestricted way, it can encourage default”.