By SERGIO GONZAGA DE OLIVEIRA*
Chronicle of a regrettable failure
The recent political dispute generated by the inclusion of Pix among the payment methods monitored by the Federal Revenue Service still deserves our attention. Evidence indicates that the cancellation of normative instruction 2219/24 and the issuance of the Provisional Measure that equated Pix to legal tender did not eliminate the institutional and structural causes that gave rise to this episode.
In fact, the intended control of Pix directly threatened the most vulnerable economic agents in the Brazilian economy. Which are not few. According to the IBGE, at the end of 2024, more than 40 million people were informal workers.(1) From an institutional point of view, this was a serious mistake. Government agencies, such as the Federal Revenue Service, cannot ignore this immense number of self-employed workers, small and micro-entrepreneurs who live and earn their living, with difficulty, on the periphery of the system. Furthermore, informal workers are a product of the underdevelopment that still persists in a large part of Brazilian society. Without addressing this backwardness once and for all, difficulties of this nature will always be recurrent.
Since its creation, Pix transactions have been very well accepted and celebrated by the majority of the population as they have greatly simplified financial transactions. More than that, Pix has greatly increased the security of these transactions. I clearly remember low-income people carrying small amounts of cash, hidden in their shoes to escape potential muggers.
The arrival of Pix put an end to this and other difficulties. Self-employed workers, small and micro-entrepreneurs celebrated. After all, checks were not very reliable and not all of their customers had bank cards. There were no Fintechs with fee-free checking accounts. Having a checking account at a traditional bank was expensive in fees and compensation. Not all small producers, traders, self-employed workers and their customers could afford this luxury.
It is no wonder that the invention of Pix was an extraordinary success. In just over four years, Pix became the main payment method in Brazil, being used by 76,4% of the population. It surpassed debit cards (69,1%), cash (68,9%) and credit cards (51,6%).(2) The invention of Pix and the arrival of Fintechs also led to a significant increase in the number of bank customers. According to the Central Bank, between 2018 and 2023 this number jumped from 77,2 million to 152,0 million individuals.(3)
However, the creation of Pix was also very well received by organized crime, corruption and offenders in general, as they now have a much more practical means of payment that is free from control and inspection. Much more functional than the traditional suitcases of money that are transported with difficulty and risk.
The Federal Revenue Service attempted to eliminate this undesirable byproduct of the invention of Pix by issuing the aforementioned normative instruction. In practice, it cancelled the equivalence of Pix to legal tender, establishing that monthly transactions above R$5 for individuals and R$15 for legal entities should be reported to the Tax Authorities. This instruction included new Fintechs and their free accounts.
By doing so, the IRS was closing the doors to tax evaders, but, most importantly, it was making life difficult for offenders of any kind. However, it made a serious mistake. It threatened the most vulnerable.
The universe of small and micro-entrepreneurs and self-employed workers is quite diverse. Many are formalized through the Simples and MEI. In these regimes, taxes are significantly reduced. Even so, for many of them, taxes are still high. They are small home producers, street vendors or IT technicians who provide services in homes or company offices. But they are also delivery people, seamstresses, hairdressers, manicurists, day laborers and professionals who do small repairs, with low qualifications. All of them avoided issuing invoices and sought to receive their sales in cash, with all the risks and difficulties that this option entailed. Pix naturally came to their aid.
For some, such as delivery people and app drivers, the market in which they operate is an oligopsony, made up of a few service providers. Uber, 99 and IFood are the best known. Under these conditions, the value of their work is established by the contractor in a very restricted market, which can often lead to labor exploitation. These small business owners and workers, in most cases, barely make a living from their activities. Obviously, most of them do not pay taxes. Nor could they. They have nothing to earn.
The Federal Revenue Service, in establishing the ceiling of 5 thousand reais, must have taken into account that 80% of Fintech customers have an income of up to 5 thousand reais.(4) However, this amount is very low. The financial transactions of these small economic agents are very misleading. Especially if we consider that this amount includes the total expenses and not just the remuneration for their work. A typical example is a micro-entrepreneur who makes and sells sweets and cakes, working from home. Her income includes all materials, energy and wear and tear on the utensils and equipment used.
Home service providers, such as firefighters and electricians, as well as motorcycle delivery drivers and taxi drivers, are in the same situation. Spare parts, fuel, wear and maintenance of their motorcycles and cars make up the majority of their income. It is also important to remember that some of these informal workers do not have accounting control over their activities. In fact, they do not know exactly how much they earn or receive at the end of the month, much less what portion of their income is expenses and what their available balance is.
For all these reasons, insecurity has set in. A large part of the Brazilian population felt threatened by the IRS's normative instruction and imagined that other restrictions could be announced in the future. Not without reason, in the popular imagination, the IRS is very voracious, especially with low and medium incomes. In Brazil, those with lower incomes pay more taxes proportionally than the richest. The tax system is essentially concentrated.
The reaction was huge and was used by the far right to get out of the defensive situation it had been on since the revelation of the coup d'état plan, detailed by the Federal Police. The video of an opposition deputy exploited this insecurity, reaching 300 million views on Instagram in just a few days. Obviously the video was edited in a catastrophic tone with many fake news and half-truths. Certainly the great impact of the video was not only due to its ability to communicate in new media.
The insecurity and dissatisfaction of the most vulnerable played a major role. Given the negative repercussions, the Federal Government correctly canceled the IRS's normative instruction and determined that financial transactions with Pix in any amount would be equivalent to legal tender.
However, this remedial measure is not capable of correcting some characteristics that have long characterized Brazilian society. Informality is obviously not the fault of the informal workers. So much so that a recent survey by FGV/IBRE showed that almost 70% of self-employed workers would like to have a formal job (5). The Federal Revenue Service needs to find creative ways to make life difficult for major tax evaders and offenders without affecting small informal workers. It needs to be aware that it operates in a country of extreme inequalities.
Furthermore, as already mentioned, high informality is a structural problem in the Brazilian economy. Informality is largely the result of the stage of underdevelopment in which we live. According to the IBGE, in the quarter ending in September 2024, 38,8% of the workforce in Brazil was informal.
By comparison, in developed economies this number rarely reaches 10%. However, overcoming underdevelopment is not an easy task. It requires long-term planning and implementation. Progressive and democratic forces need to find a way to put this project on their agenda. To create the concrete expectation that one day we will achieve a welfare state.
*Sergio Gonzaga de Oliveira He is an engineer (UFRJ) and an economist (UNISUL).
Notes
(1) Brazilian Institute of Geography and Statistics, Continuous PNAD 2024, November 29, 2024.
(2) Central Bank of Brazil, Brazilians and their Relationship with Money, Research from 28/05 to 01/07/2024.
(3) Central Bank of Brazil, Banking Economy Report, 2023.
(4) Globe Economy, Pix and fintechs included 60 million in banking services in a decade, 20.01.2025.
(5) Campelo, Aloisio et al, Self-employed workers: who they are and what they think, IBRE / FGV, 01.07 2024
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