Who will pay the bill?


By Fábio Konder Comparato*

It is essential to start working on the tax system, which is based much more on consumption taxes – the amount of which is the same for everyone, rich or poor – than on income tax.

Nobody doubts that humanity is currently suffering one of the greatest catastrophes of the last hundred years. Its effects, in all fields of human life, are still immeasurable because, on the one hand, there is no safe prediction of the duration of the hecatomb and, on the other hand, because until today we have not managed to build institutions on a planetary scale, not even to act effectively in the field of health. The international institution that came closest to doing so was the World Health Organization, but it limits itself to making recommendations, which are not always – as is being seen in Brazil – taken seriously.

It is therefore important for each country to establish relief plans for its own population, starting with the competent use of available economic resources, under the supervision of government authorities. Based on these premises, let us focus our attention on Brazil, starting by putting aside the ridiculous idea that the fight against the coronavirus pandemic can be done through private donations.

As this is a disease that affects the people as a whole, and especially the indigent population, it is essential to keep in mind, first of all, that the resources to be used in combating it, whatever their origin, are public, in the original sense of the word in the Latin language; that is, they belong to the Brazilian people. Furthermore, we must never forget that Brazil is one of the countries with the greatest social inequality in the world.

In order to break this situation of extreme social inequality, it seems essential to me to start acting on the tax system, which is based much more on consumption taxes – the amount of which is the same for everyone, rich or poor – than on income tax. To correct this social injustice, we can use the legislative route, without any change in the constitutional text, as I exemplify below.

In our country, the maximum income tax rate for individuals is 27,5%. With this, we occupy the 89th position in the world list of countries, listed according to the value of this rate. Ahead of us are 16 European countries, and in six of them the rate can rise to more than 50%. We are also behind eight Latin American countries. It is also worth noting that in the United States, a model always invoked by the current President of the Republic, the rate of personal income tax is 37%.

As if this tax weakness were not satisfactory for people in the middle class, not to mention billionaires, in 1995 the National Congress approved and sanctioned by President Fernando Henrique Cardoso Law nº 9.249, which established the exemption from income tax on profits and dividends, paid or credited by legal entities to their partners or shareholders. Let us suppose, then, that a wealthy individual decides to invest the bulk of his assets, to offset the risks, in a dozen companies. How much will you pay in income tax on dividends received? Zero.

As for corporate income tax, the rate in Brazil varies from 6% to 15%. Even then, our legislator sought to preserve business assets, no doubt on the assumption that all companies domiciled here contribute to national wealth. It turns out that, when making an international comparison, we find that the maximum rate of this tax in Brazil is lower than that of 35 (exactly thirty-five) other countries, including that applied in the paradise always exalted by our Head of State, the United States of America : 25,9%.

Still in the field of tax policy, it is worth remembering that the 1988 Constitution, in an unexpected innovation, created a tax on large fortunes, to be instituted by the Federal Union (art. 153, item VII). However, as was immediately obvious, especially for those to whom such a tax would be directed, the complementary law necessary to give effect to this constitutional provision has not yet been voted by Congress.

These are just a few examples of remedies that can and should be used to minimize the effects of the pandemic disease; although we all know that its cost will be borne, as always in this country, above all by the multitude of the poor and miserable.

* Fabio Konder Comparato Professor Emeritus at the Faculty of Law of the University of São Paulo and Doctor Honoris Causa of the University of Coimbra.

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