Tax reform should reduce tax evasion and encourage foreign investment, says Finance Secretary

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Extraordinary Secretary of Tax Reform, Bernard Appy, stated that many tax evasion loopholes will be closed if the reform takes place. And that the current system is a barrier to the entry of foreigners. The tax reform proposals being debated in the National Congress close currently existing loopholes for tax evasion, in addition to reducing costs and stimulating foreign investment. This assessment is made by the extraordinary secretary for tax reform at the Ministry of Finance, Bernard Appy. “It closes many gaps, [utilizadas na sonegação] not close all. No tax system in the world closes all the loopholes. There are countries with simple VAT, such as South Africa, which have a ‘compliance gap’ [lacunas que geram perda de arrecadação] very low. The more confusing the system, the greater the possibility of evasion”, said Appy to g1. The proposals under discussion include the extinction of the PIS, the Contribution for the Financing of Social Security (Cofins) and the Tax on Industrialized Products. They would be “exchanged ” by a value-added tax, which already exists in developed countries, which would be non-cumulative, that is, it would be paid only once by each stage in the chain (producer, distributor and trader). harmful products such as cigarettes and alcoholic beverages.Discussed for decades and long awaited by the productive sector, the tax reform is considered essential by the government to bring Brazilian rules closer to the rest of the world and reform a system that is seen as chaotic by businessmen and investors. Analysts estimate that this first stage of tax reform, which will alter consumption taxes, has the potential to raise Brazil’s potential GDP by at least 10% in the coming decades. Tax reform: sectors of the economy complain about tax increases; proposals bring ‘escape valve’ Cost of inefficiency According to Appy, in the current system for collecting taxes on consumption, the population pays not only the tax, but also bears all the inefficiency and unnecessary costs linked to the problematic tax system. “There are sectors of the economy where the bureaucratic cost of paying taxes is 3% of the sector’s GDP. The cost of tax litigation is monumental. A Brazilian industrial company has 200 people to pay taxes, a similar company in the US has 5 people. it is cost, and this cost reduction will be passed on to the price. The final effect of the reform will be a price reduction for the consumer”, he declared. Foreign investments Appy also stated that the tax reform would also stimulate the entry of foreign investment into the country. The explanation is that the current, complex system scares businessmen from outside Brazil. According to the secretary, competition ends up being unbalanced, because Brazilian businessmen already understand the system. The foreigner, no. “In fact, there are many productive companies that stop investing in our country because of our tax system. It’s not a little, it’s a lot. And then I think it’s going to have a very positive effect. for foreign companies that want to enter Brazil, but the guys give up when they get to know the Brazilian tax system”, he declared. “We are reducing the competition because, who is inside already understands and can operate. Who is outside… our system is made to take the competitiveness of the national system”, he added. According to Appy, many companies prefer to produce abroad and sell to Brazil rather than open factories due to the tax system. “For them, sometimes it is better to import in Brazil what they produce abroad, than to produce in Brazil. It does not have a lot of the cost that it has in Brazil abroad, which the tax reform tends to eliminate. The effect tends to to be big. It doesn’t all come in the short term, it comes over time. It’s all staggered”, he concluded.

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