Online shopping revolt indicates how difficult it will be to increase tax – 04/13/2023 – Vinicius Torres Freire

The Lula government wants to reduce tax evasion in international electronic commerce. If the plan works, it will limit the activity of moneylenders and digital cashiers. If it works, many ordinary people will no longer be able to buy imported goods over the internet, as the products will become more expensive or the companies selling them will disappear.

The Ministry of Finance is right. Barely comparing, it’s like trying to end up with a digital version of the old bagmen who did business in Paraguay. But the government touched several wasp’s nests, from small consumerism to tax injustice. It will affect a very small consumer without having at hand the discourse that it is also affecting the rich, for example.

When it comes to a higher tax, nobody cares about an economic argument, even less so in a precarious, informal, poor country with a relatively high tax burden, as is the case in Brazil.

At the bottom of the revolt, one can also feel the acrid aroma of another, more fundamental crisis, in part related to the so-called political polarization of recent years. People don’t want to pay more taxes, but a large part of the country wants a state that spends. On the other hand, part of the middle class or people at the heart of the income distribution dislike what they consider favors for the poorest, feel wronged by taxation and think that the State is a hindrance.

A lot of people simply say that the extra tax bill should be left with the richest (it’s true) or it should be paid by cutting privileges for “politicians”. Certainly, Brazilian parliaments and the judiciary are expensive. Even if they cost much less, however, the fiscal problem (spending and government debt) would barely be scratched.

This digital swag crisis is a wake-up call for other tax and revenue raising campaigns to come. For the “New Fiscal Rule” to work, the government needs to increase the tax burden. That is, to make the total collection in relation to the size of the economy, of GDP, increase by at least 1.5% of GDP (R$ 150 billion).

About half of that extra cash it might need by 2026 would come from ending a tax break that particularly benefits retail. Even if this project passes through Congress unscathed, the case may end up in the STJ; if it works, it may trigger some price increase. Before that, some of the larger retail companies must make noise, especially those owned by anti-PT members. As for smuggling in e-commerce, people in general have no idea that they pay cheaper also because they don’t pay taxes on the products they import. They don’t know, they don’t want to know and they are angry with those who know. They don’t take into account that digital smuggling harms the businesses and jobs of retailers, small to large, and likely certain industries as well.

As if the sururu were not enough, it is not easy to carry out inspections and even less to designate those responsible for collecting the tax. Many e-commerce centers are a virtual mall, a “marketplace”, just an intermediary for several independent sellers. Will the owner of the “marketplace” collect the tax? The company responsible for the financial transaction?

As the government argues, it is necessary to charge import tax in the name of some fairness in competition. If it works, there would be indirect and diffuse benefits for the economy, although not very large. The government hopes, optimistically, to collect R$ 8 billion in taxes per year, in this offensive. The damage in small purchases, however, will be great and perceived very concretely by the citizen.

In the middle of the “tax framework” there is a tax quarry.

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