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In order for the tax reform to improve the country's business environment, changes in the complex Brazilian tax system must pay special attention to Individual Microentrepreneurs (MEI), micro-enterprises and small businesses, which represent 9 out of 10 of existing companies. in Brazil, according to June data from the Ministry of Economy's Special Secretariat for Productivity and Competitiveness.

 

The sector composed of small businesses was, according to Caged, responsible, in 2021, for 78% of formal jobs and benefits 86% of Brazilians, 40% of the population. It also generates an income for entrepreneurs and other workers in the segment of R$ 35 billion per month. Per year, this amount reaches R$ 420 billion, according to data from the Atlas of Small Businesses, a survey by the Brazilian Micro and Small Business Support Service (Sebrae) launched last July.

 

But the sector, in addition to being a great generator of employment and income, is a great source of taxes. In 2021, Simples Nacional alone collected more than BRL 128 billion in taxes for the public coffers, and by June 2022 it had already collected BRL 73.1 billion, indicating an increase in collection in the year. Since its creation, Simples has raised R$1,032 trillion for the coffers.

 

 

Experts heard by JOTA point out that the main way to improve the taxation of small businesses in Brazil is to reduce the complexity of the tax system and rethink the tax substitution of ICMS, taking care not to disproportionately burden the service sector.

 

1) The exaggerated complexity of the Brazilian tax system

According to the manager of Public Policies at Sebrae Nacional, Silas Santiago, the main focus of the tax reform should be the simplification of the country's tax rules.

 

In addition to the weight of the tax burden, small businesses suffer from excessively complex ancillary obligations, which demand even more time and resources from the taxpayer to comply with the tax authorities. This extra expense is called Custo Brasil Tributário by Santiago.

 

“This simplification does not depend on a constitutional tax reform, which unifies taxes, and would already bring huge gains for all companies”, he said.

 

The Union, states and municipalities require the taxpayer to adapt to different invoice models, in addition to different tax declarations. In addition, companies must determine the tax due for each unit of the federation, a calculation that is often contested by the tax authorities and generates litigation in the administrative and judicial spheres.

 

The economist and professor at Insper, Juliana Inhasz, a specialist in macroeconomics, pointed out that this type of cost reduces the availability of money for other companies' needs, such as investments to increase production, especially in the case of small businesses. Thus, a tax reform would pave the way for an increase in productivity.

 

If the tax authorities provided the tax payment guides, or at least the pre-filled statements for taxpayer confirmation, small businesses would not need to spend so much on accountants and tax specialists. In this sense, for Inhasz, the complexity of the tax system still works as a disincentive to formalization and, consequently, reduces the collection of federal entities.

 

“Companies know that the cost of operation is extremely high to be on the formal side of the economy, so they somehow end up giving up on that”, she evaluated.

 

“With a simplification, we would probably have a reduction in the number of informal workers, a greater collection and a much clearer way of seeing and understanding this tax system”, she concluded.

 

How to solve?

To solve this problem, Sebrae actively participated in the discussions and contributed to the construction of Complementary Law Projects (PLP) 145/2021 and 178/2021. As the proposals do not change the Constitution, Sebrae assesses that there are conditions to be approved in 2022.

 

PLP 145/2021 creates the Electronic Tax Calculation System - a unified system for the tax authorities themselves to calculate the tax owed by the taxpayer and simplify the collection of taxes.

 

“Today, with the electronic invoice, the tax authorities have all the elements to calculate the taxes, even if it is in the form of a pre-filled declaration, as the Federal Revenue has been doing with the income tax of individuals”, stated