Angelo Ambrizzi
Lawyer at Marcos Martins Advogados
It’s no news that we have one of the highest tax burdens in the world, equivalent to Germany and Canada, but without the public services provided by these countries.
For this reason, we need a structural tax reform, i.e. one that designs a new system that guarantees fair tax collection, but one that is sufficient for the government to cover its expenses and implement public policies that result in the provision of good public services.
Analyzing the current political scenario, in which on one side there is a party with liberal premises and on the other, one with a social ideology, it is clear that the paths are almost antagonistic, mainly due to the essence of each government model.
Ideologically, the liberal government’s premise is to reduce the role, interference and scope of the state, which results in the elimination of expenses, optimization of available financial resources and prioritization of public spending on activities that generate opportunities for natural and legal persons to develop in order to produce jobs and opportunities. With the reduction in state control, there are fewer regulatory agencies and the Central Bank is granted autonomy.
The natural consequence of this reduction in the scope of the state is a reduction in public spending and the possibility of proposing a comprehensive tax reform project, the main theme of which is to reduce the tax burden.
This doesn’t mean that taxation can’t be increased, and that the reduction should be on personal income and consumption. A recent example is Minister Paulo Guedes’ statement that he intends to create a tax on dividends to cover public policies to help citizens.
On the other hand, the social government tends to increase the size and action of the state to implement public policies aimed at guaranteeing citizens their fundamental rights. Another common point is the increase in the number of regulatory agencies and ministries, accompanied by possible intervention in monetary policies, reducing the autonomy of the Central Bank.
These characteristics, when implemented, lead to the need to increase state revenues, and this implies an increase in the tax burden, since there is an increase both in the state structure and in the need to distribute money to those most in need. In this sense, any social government’s tax reform project will be to increase the percentage collected by taxes.
The challenge for the liberal government is for society to develop in order to generate income in its economic and business structure, which will reduce people’s need for public services.
The difficulty for the social government, on the other hand, is to generate efficiency through good management of the state apparatus so that the amounts collected return as public services, without major losses in the process between collecting and investing in public policies.
Regardless of who is elected, it is certain that we will have a tax reform. What remains to be seen is its extent, depth and the objective sought by each party.
