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                              Lawyer collected the national regulation of taxes in one volume with the weight of an elephant

Every working day 46 tax provisions are edited in Brazil in the three levels of government, being the municipalities responsible for almost 60% of this volume. So, per year, people and companies start to live with 12 thousand new laws on taxes, according to the annual study by the Brazilian Institute of Tax Planning (BIPT).

This complex and comprehensive legislation - which makes Brazil the world champion in tax bureaucracy - will be gathered in a giant book by the lawyer from Minas Gerais, Vinicios Leoncio. The publication will have the weight of an elephant 7.2 tons. There will be 43,200 pages from 1.4 by 2.2 meters, and a bump of 2.5 meters.

After three heart attacjs in two years, the author has delayed the launch of de book from 2011 to the end of 2013. "It is a huge undertaking that can kill", says Leoncio. The first presentation will be in front of the National Congress, there is still no date set, and will be part of the actions of the Congressional Debureaucratization. The group has existed for two years and struggle to reduce the bureaucratic obstacle in the country.

Of his 53 years of age, 22 Leoncio has dedicated to this work, which is now a strong candidate for the Guinness Book, the record books. "When I started, I had not the desire to compete in the Guiness. But after the book almost done, I see no way, at least in the medium term, it does not appear as the largest in the world".

After the launch in Brasilia, the lawyer will give a tour of the country with the work. The aim is to invite the society to reflect.

"Something must be urgently done to take this awkward position of Brazil's largest exporter of tax bureaucracy in the world", says Leoncio. To perform the project, he adapted a wagon of 9 meters long, where people can come in and handle the book.

The difficulty, he said, was to access to municipal laws. About 30% of the 5,567 Brazilian cities had no scanned laws during data collection. Thus, 1200 municipalities were out of the book, which covers the period between 1992 and 2005 and required an investment of R$ 1 million.

To fill these absences and make full consolidation of the laws, the attorney is already planning a second edition, which he intends to write in ten years.

Ranking. The “tupiniquim” (a Brazilian nickname to what is old-fashioned) tangle of taxes and duties was also highlighted in the World Bank study and consultancy PwC. The document raises the tax system as a major constraint to economic development in Brazil and warns that little has changed in the last eight years - time in which the survey was conducted.

The survey says that the country has confusing laws and cites the GST as a particularly complex tax. Because it requires frequent exchange of information and sharing of revenue among the 26 states and the Federal District.

According to the study, a company takes 2600 hours or 65 weeks per year to keep up with the Revenue - the worst performance among the 185 countries surveyed. Following is Bolivia, where companies lose 1025 hours, less than half of the national average.

But the first step to a more exciting scenario has already been taken, emphasizes the research, citing the sheet of digital payment. The system, which will be mandatory from 2014, unites in a single database the variety of information that is now provided in several statements.

Finally, the World Bank notes that it is still waiting, and hoping, to see the positive results of the new system.

Interestingly, the place where the giant book of taxes will stay after travelling around the country will be a centennial farm in the state of Minas Gerais, called Patience.

Historical criticism. In 1922, the year of the creation of the income tax in Brazil, Monteiro Lobato wrote an acid criticism of the new tax. The writer created an analogy between the Revenue and the Lilliputians, people of small stature who inhabited the imaginary land of the novel Gulliver's Travels.

The giant of story would be Brazil and the dwarves would be worms stifling the nation. In the view of Lobato, the income tax would be a way to tighten the giant that, exhausted, succumbed before the sadism of the Treasury, explains the Professor Fernando Zilveti of GV Administration.

Eight legal aberrations

Complication. Brazil leads the ranking of tax bureaucracy, according to the World Bank. The system is seven times more complex than in Sierra Leone and 32 times than in Norway.

Instability. The complexity of the legislation creates legal uncertainty. It takes, on average, 10 years to resolve a tax process that often ends up in the Supreme Court.

Tangle. There are in the country more than 5,500 Municipal Tax Codes, as well as 27 State Codes.

Distortion. A person pays more income tax (IR) than a company. When the company has a loss, it does not pay the tribute. But a person, even when in greater expense, more than the gain, still has to pay the tax.

Excess. Besides the actual payment of taxes, companies need to fill in 2,200 form fields per year. Companies are required to submit a series of statements, guides, reports and writings to the Treasury.

Mismatch. Companies pay the taxes, on average, 25 days after the sale, but only receive the invoice after 57 days. There are cases where the GST is paid even before the goods leave the company.

Pressure. The government makes use of the criminal law to receive the taxes. Being afraid of an action, the entrepreneur, sometimes, pays an unfair tax. In most countries it is rare the opening of criminal proceedings.

Stamps. Brazilian companies are required to have a document just to prove that they are up to date with tax authorities and the Social Contributions. Without the called negative certificate, the company is prevented from conducting business.

Source: Estadão
Version: Grazielle Segeti

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The cost of labor in the Brazilian industry is still one of the highest in comparison to other countries. While in Brazil this cost rose 6% in the period 2004-2011, the average of six world economies fell 14.6% in the same period. The data take into account the information which is available at the BLS (Bureau of Labour Statistics), the Department of Labor Statistics of the United States, and the OECD (Organization for Economic Cooperation and Development).

Comparisons were not made with Latin American countries or BRICs (Russia, India, China and South Africa, besides Brazil) due the lack of reliable information, according to the study of FIRJAN (Federation of Industries of Rio de Janeiro).

"Reducing the cost of labor is directly related to investments in research and development, and reforms in the labor and social security legislation", says Mercês. "With the outbreak of the global crisis, the U.S. and Europe have realized the need to cut costs to compete in the international market", he adds.While Brazil invests 1.16% of GDP in Research and Development (R & D) in Europe and the U.S. the investment is 3%.


In fact, the country is on the opposite of competition. The investments made by Brazilian companies in R & D had a decrease of 18.3%, according to a study by the international consulting firm Booz & Company. Expenditures increased from U.S.$ 3.7 billion (in 2012) to U.S.$ 3 billion this year. In the world average, investments in this area rose by 5.5% over last year and reached U.S.$ 638 billion, a thousand public companies took part in the survey.

Carlos Pastoriza, director of Abimaq association of manufacturers of machines, says the growth of wages in the sector grew 30% in the past decade, while the productivity has not reached 15%. The segment of machines is one of the most affected by the combination of sharp decline in production activity with increased spending on payroll, according to the analysis done in 15 segments of the manufacturing industry.

"If you pluck up a plant in Germany and installed it in Brazil, held jobs, technology and other characteristics, the final product here would cost 37 percentage points higher. Only the weight of the supplies and paper correspond to 20 percentage points", he says.

Of the total amount of machinery "consumed" in the country, 65% are imported and 35% are national". We are facing a silent and masked deindustrialization. Industries are becoming assemblers of products, which leads to the destruction of jobs and the supply chain, since our product is unable to compete with imported ones", Pastoriza says. The industry maintains a system of differential taxation, as occurred in the automotive, decreasing IPI and other tax incentives. "It takes an Innovate - machines (in allusion to Innovate - Auto) to recover productivity", says the director of the association.

In construction, despite technological advances that allowed, for example, companies in the sector doubling its manufacturing capacity of housing to meet programs like “My House, My Life”, productivity is still in balance with the cost of labor. "Although there are advances in productivity, wages grow at uneven pace, mainly because of the shortage of skilled manpower in the industry", says Paulo Safady Simão, President of the Brazilian Chamber of Construction Industry.

"It used to be even worse in the past, but this is still a reality that industries face".

Text: Claudia Rolli
Version: Grazielle Segeti

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