The taxing regime of Brazil

RESIDENTS of Brazil are some of the most taxed people in the world. Between the federal government and state authorities, everything that is industrialized is heavily taxed. That’s why gasoline costs R$2.95 a liter, that’s around US$1.43 per liter! There even used to be a so-called “check tax” that generated revenue for the federal government every time a Brazilian wrote a check.

If you want to import anything into this country, be it books and DVDs from Amazon, to furniture or clothes, the federal Brazilian government and state authorities levy a hefty 60 percent tax on the declared value of the goods being imported! Therefore, it’s no wonder that luxury retailers such as the fashionable clothes store Daslu and the upscale home furnisher Tania Bulhoes, both based in Sao Paulo, have recently been targeted by tax authorities for undervaluing the goods they import in a bid to escape from paying the exorbitant tax rates.

Most Brazilians seem to passively accept these ridiculous tax rates as all prices on consumer goods already include the tax, so the consumer cannot tell how much the same goods would cost with a reduced tax or no tax at all.

To give you an example, I recently searched online for the new Nokia N97 mobile phone and found it for sale in the US for $597. It is being sold here in Brazil online for R$1,987.19 or $1,068. That’s $400 more than the US price! Why? Because of the 60 percent import tax.

But the Brazilian government, burdened with an ever-expanding budget for education, health and President Luiz Inacio Lula da Silva’s poverty reduction program called Bolsa Familia, is always looking for new ways to raise more funds by taxing Brazilians even more. The Correio Braziliense newspaper recently reported that the Ministry of Education and Culture was thinking of levying an additional 0.1 percent tax on all sales at book and stationary shops in order to finance a fund that would encourage reading among Brazilians. Book retailers reacted negatively saying they would have to pass on the tax (which they said would actually cost them 0.2 percent) to book buyers, which would therefore make books more expensive and therefore actually discourage more reading!

Now President Lula wants to re-introduce a tax on all checks written in the country to finance a health fund that would improve public hospitals. The opposition Democratas party called it a terrible idea, pointing out that Brazilians are already one of the most taxed people in the world. Globo TV’s Jornal Nacional pointed out that a similar tax on all gasoline sold in the country, supposedly to fund road improvements throughout the country, had never been used for such purposes. Luckily for us, there is not much support for the new tax in the Brazilian Congress, which would need to approve it.

Already the government is under fire by the opposition for releasing a much bigger projected budget for next year, despite revenues having been flat or even fallen in some areas because of a drop in tax collection.

Next year is an election year, so its no wonder Lula and his allies are looking for ways to spend, spend, spend so that they can boast to the electorate of how much they’ve done for the country. But pity the opposition, who have a good chance at winning a majority next year, if they get stuck with the burgeoning debt and have a hard time paying it down.