Tax reform

Urartian Culture, Medallion, 8th-7th Centuries BC


Elites want to maintain our inequitable tax structure

What amazes me, nowadays, is that class illusion –a term often used on the left to define a certain type of alienation typical of those who forget the nature of social classes– continues to dominate our business elites and their heralds, analysts and even economists. The symptoms of this alienation are expressed in the government's tax reform proposal, which maintains the same current structure of income concentration: it does not include increasing IR (Income Tax) rates for those who earn more, it maintains the current derisory rates for inheritances and donations and do not tax the great fortunes.

In fact, the proposal does not change the current tax structure and its main characteristic, which is to charge more from those who earn less and almost nothing from the very rich. According to a 2019 UN report, 1% of Brazilians concentrated 28,3% of the income and the richest 10% now account for 41,9% of the income. With the pandemic, the phenomenon of concentration has worsened.

The proposal to tax profit, dividends and profit on own capital, present in the text of the reform, provokes an outcry among spokespersons of the financial market. The increase in income tax rates for those who earn more was not even considered. However, the rates are progressive for those who earn less (7,5%, 15%, 22,5% and 27,5%, above BRL 4.664,69). That is, from the point of view of the tax structure, it doesn't matter whether you earn R$5, R$50, R$500, R$5 million and so on.

Those who live on a salary, in addition to the IR, pay the same indirect and regressive taxes on goods and services as those who live on an income or receive high wages. Thus, in practice, it is the workers, the poor, the middle class who bear the tax burden. The rich and the upper middle class benefit from exemptions and deductions or simply do not pay taxes.

The Federal Revenue itself declared that the 21 richest Brazilians pay only 1,8% of tax on income, the 65 richest Brazilians hold US$ 219,1 billion and the assets of the super rich grew by US$ 34 billion during the pandemic .

The class illusion of the financial elites also applies to real interest rates and banking concentration. The cartel of banks and a minority of rentiers navigate the calm waters of income from financial investments and interest paid by the government to service the public debt, which represents an expropriation of income from workers and their families and from small companies.

What is paid for servicing the public debt is a clear example of expropriation and the concentration of gains in the financial system. In May of this year, the Selic rate was at 2,75% per annum, today it is 4,25% and the forecast is that it will reach 2021% by the end of 6,5. That is, an increase of 3,75 points from May to December. This means that we will pay more to service the internal debt: for each point more in the Selic rate, we pay an additional R$31,8 billion.

With higher interest rates, debt service grows, although less than 1/3 of the debt is indexed to the Selic rate. The interest rate on public debt securities has no direct relationship with the Selic, but with other indices – when the Selic was at 2%, the average public debt rate was 8,4%.

In real life, Brazilians pay stratospheric interest, whether on credit cards, personal loans, revolving credit, overdrafts, or consumer credit. The difference between what banks pay for our money and what they charge us, on average, is 33,3 points for individuals. Just to refresh your memory, the annual credit card interest rate in February this year was 306,2%; in personal credit varied between 3,98% and 5,23% per month, more than 50% per year.

The result could not be otherwise. The increase in poverty and the return of hunger, 15 million unemployed, 33 million underemployed, 6 million discouraged. Half of the economically active population of the country with fallen arms or underemployed. A humanitarian tragedy made worse by the pandemic.

What scares me about our elites, in addition to their absolute insensitivity to the social question, is their belief that if the economy grows, everything will be fine, Bolsonaro will be re-elected and Brazil will be well governed by him. They turn a blind eye to the criminal management of the pandemic, to the 516 Brazilian men and women killed by covid-19, to obscurantism, religious fundamentalism, environmental, cultural and education devastation, scientific denialism, international isolation, the risks of authoritarianism , the militias and the preaching of hatred and violence, homophobia and sexism, the end of democratic freedoms. Nothing matters as long as the economy grows and your candidacy becomes competitive again.

They do not see that economic growth alone does not win elections or bring social welfare. If reality were as they preach, Chile, Peru and Colombia would not be experiencing true revolutions and popular uprisings today. The increase in repression and even the presence of the Armed Forces in the streets failed to contain the rebels. On the contrary, it increased the strength of the movements that was reflected in the ballot boxes.

It is pure class illusion of the Brazilian elites to ignore the growing awareness of the iniquitous social inequalities of our society by the majority of the population, the racist and sexist character of our society, the unfair tax structure where the rich do not pay taxes, the growing participation of youth in struggles and their thirst for justice and opportunity, the failure of the neoliberal model worldwide, especially in South America.

How is it possible to pretend that the orange grove and the fake news who elected Bolsonaro, his relationship with the militias, the cracks and now the web of corruption that involves not only his government but the military who participate in it? The political primarism of our political and economic elites is appalling.

We can only be certain that, as in the last 70 years, it will be up to the people, the workers, the social movements, the youth, the women, those who resisted the dictatorship and who defeated the Arena in 1974, those who forged the Diretas Já, to those who inscribed their rights in the Constituent Assembly and elected Lula and Dilma to govern Brazil, defeat Bolsonaro and these predatory elites. It is these popular forces that will guarantee democracy and social changes to complete our unfinished national construction, centered on the country's sovereignty and on the distribution of income and wealth.

Dirceu he was Minister of the Civil House in the first Lula government. Author, among other books, of Memoirs (Editorial generation).

Originally published on the website Power360.


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