Henrique Meirelles says tax reform improves the investment environment
The reform was approved after thirty years of discussions in parliament
247 – The tax reform approved by the Brazilian Chamber of Deputies represents a significant advancement in simplifying the system, writes former Finance Minister Henrique Meirelles in an article published in the newspaper Estado de S. Paulo. The main change is the replacement of five taxes (PIS, Cofins, IPI, ISS, ICMS) with two, CBS (federal) and IBS (state and municipal). According to Meirelles, the elimination of ICMS is the most important point as it eliminates a series of problems caused by the coexistence of 27 state legislations. With a simpler structure, after 30 years of discussions, a better business environment and a greater capacity to attract investment are expected.
According to Meirelles, the current tax system is extremely complex and causes losses to the country. According to a World Bank study, a Brazilian company spends, on average, over 2,600 hours per year dealing with bureaucracy to pay taxes. This does not include the working time needed to generate enough revenue to cover taxes, but rather the working hours of accountants, lawyers, and others to fulfill bureaucratic obligations.
This complexity increases the so-called "Brazil cost," driving away investors and harming entrepreneurs. Meirelles points out, however, that some governors are dissatisfied because they like to have the power to tax, to discuss tax rates with each taxpayer, and to offer lower rates to attract companies. "I understand that they do not want to lose this power. However, the productivity gain for the entire Brazilian economy is more important. Those who invest in Brazil will have better conditions to produce, which is essential to generate more jobs, income, and drive economic growth. This will only be possible with a rational tax system, something we have been waiting for 30 years", he notes.
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