Being poor is a sin – for isonomy in taxation

Shikanosuke Yagaki, Still life, 1930–9
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By FERNANDO NOGUEIRA DA COSTA*

If the Brazilian elite could, they would not pay any taxes and refuse to debate how to overcome one of the greatest social inequalities in the world.

The article by João Camargo, chairman of the Board of Directors of Esfera Brasil, “Being rich is not a sin”, published in Folha de S. Paul on 02/09/23, created a commotion in the social network of progressive people. Can this uproar be seen as a revolt by those who think “being poor is a sin”? After all, by misfortune of the cradle, poverty condemns the unfortunate person to suffer in hell for his entire life...

Let's see the reason for this social unrest. The argument in defense of the privileges of their caste of merchants is persistent: the social pact, in the capitalist system, places the greatest responsibility for generating jobs and income on entrepreneurs. Are they “delivering” this duty sufficiently to meet all the demand in Brazil?

João Camargo simply refuses the debate on how to overcome one of the greatest social inequalities in the world. He states: “The rhetoric of the debate about taxing the 'super-rich' is harmful. Brazilians, when building their heritage, must be admired as the protagonist of a successful journey. It not only represents an example of achievement, but also contributes, very concretely, to national development. He is the one who invests, undertakes, takes risks, innovates, creates wealth, generates employment and pays enormous sums of taxes. It is a fundamental part of the machine that produces economic growth.” Can you believe…

Does society benefit so much from the value added by workers and appropriated by the wealthy? Are workers, creators of this value in the process of producing goods and services, paid fairly in this market economy?

João Camargo proposes that the National Congress legislate in (its) own cause. Soon, the president of the Chamber of Deputies said “the country does not need a 'poor versus rich' debate after coming out of a polarized election”. The conservative representative of the “centrão”, Artur Lira, said Congress was against raising taxes…

This statement, in principle, deceives the unwary: logically, they reject the increase in the tax burden on themselves. But the public debate only concerns tax equality by ending tax exemptions as unjustifiable privileges for the richest in the country.

To have a debate well based on data – and not on a priori ideology – public opinion needs to know: the average monthly remuneration of Board Members in Brazil is R$80.562 in 2023. They only had an average of 17 meetings in 2022, that is, one in every month and one more in six months.

In the case of Boards of Directors, the remuneration of the leader of the “board” – like Camargo – is, on average, 4,1 times the amount paid to the other members of the group: merit?

CEOs, in turn, receive an average annual remuneration of BRL 15,3 million, including, in addition to “salaries”, generous bonuses. This amount is 2,9 times the amount received by the other members of the Board, who reach an average of R$334 thousand per month, that is, an annual salary of R$4 million, without considering bonuses. It's fair?!

This data comes from the research “Business Leadership: A study on CEOs and Boards of Directors”, carried out by Vila Nova Partners and Drixx IT Advisors. It is worth contrasting them with the remuneration of the civil service elite, so criticized for having “privileges”.

The leaders of the private sector use their ideologues in the “big” (sic) Brazilian press to denounce those who earn close to the ceiling set for the public sector, today, at R$41.650. They are unaware that the set of servers is well below this caste of wise technocrats, as most receive about a tenth of the limit.

Half of statutory employees receive around R$3.400 per month, that is, less than three minimum wages, currently set at R$1.320. About 70% of the total receive up to R$ 5.000 a month at most.

The so-called super salaries are above the ceiling of R$41.650, equivalent to the maximum income of a Federal Supreme Court judge. This group represents 0,06% of the total. Members include judges, prosecutors and prosecutors. Between R$27.001 and R$41.650, there are 0,94% of servers. Between R$15.001 and R$27.000, 4%; between R$10.001 and R$15.000, 5%; between R$5.001 and R$10.000, 20%.

Non-statutory workers, such as informal workers in the private sector, earn less compared to registered workers. These are concurred to work in the public sector.

Most civil servants do not work in the federal government, where they are paid higher amounts. This government level hires only 8% of the total. The states hire 32% of civil servants, with emphasis on around 530 thousand military and civilian police officers responsible for public security. The majority (60%) of employees are spread across the country's 5.568 municipalities, where less is paid to, for example, teachers, nurses and social workers, hired through public competitions.

They require a certain level of education. Comparisons of average remuneration between public servants and private sector workers reveal that the best jobs are not those offered by businesspeople, but by governments. In the public sector and in the private sector, Elementary Education is paid, respectively: R$2.484 and R$1.890; High School: R$3.273 and R$2.185; Complete Higher Education: R$6.916 and R$5.910; Master's degree: R$9.012 and R$8.008; Doctorate: R$12.909 and R$9.221.

According to Sindifisco Nacional, a union representing tax auditors at the Federal Revenue, based on data from the Personal Income Tax (IRPF) of 2022 (calendar year 2021), taxpayers with declarations of total earnings above 160 minimum wages (R$ 2,1, 176 million in the year or BRL 5,5 per month) paid, on average, an effective Income Tax (IR) rate of less than XNUMX%.

The effective tax rate – the percentage of total income actually confiscated by Income Tax – of these millionaires was below that charged to elementary school teachers (8,1%), nurses (8,8%), bank employees (8,6%) or social workers (8,8%) — professionals whose total income (sum of salaries and other income) was below R$94 thousand (less than R$8 thousand per month). They were also below military police officers (8,9%), whose total average income in 2021 was BRL 105 (BRL 8.750 per month); doctors (9,4%), with an average total income of R$ 415 thousand (R$ 34,6 thousand per month).

According to Sindifisco, the main reason why the richest have a lower tax rate is that a significant portion of their income comes from receiving profits and dividends from their companies, which have been exempt from tax in Brazil since 1996. In turn, the middle class has a greater portion of your earnings coming from salaries, generally taxed at source, with progressive rates up to 27,5% for monthly earnings above R$4.664,69.

It is doubtful that the current National Congress will approve the proposed tax measures, such as taxing exclusive funds for millionaires and investments abroad, re-taxing profits and dividends distributed by companies, and imposing new rules on inheritance tax to prevent the richest families from avoiding collection. from ITCMD. Federal senators and deputies have no interest in voting on this type of measure, because those who finance their campaigns are the ones who would be taxed and, then, their lobbies would react.

A Great Wealth Tax (IGF), by causing capital flight, would not serve the function of, as expected, reducing the concentration of the stock of wealth. In reality, taxation of the income stream by the IR should exercise the intended distributive function. So I suggest not taxing the stock, but taxing the inescapable flow.

Taxpayers burdened by a Wealth Tax would have an incentive to use tax planning, hide assets, and increase the current consumption of superfluous goods, increasing tax evasion. Ultimately, the increase in the country's tax revenue would be minimal, not even compensating for the political strain and negative economic impacts resulting from the imposition of this tax.

If a Tax on Great Wealth were levied on the entire wealth of individuals – and not just on the gains made in the year –, the fortunate person, according to the range of their wealth, would pay a tax rate every year on the entirety of their wealth assets. progressive mode. Undoubtedly, it would be an incentive for capital flight.

Therefore, it would be more prudent for the tax to be levied only on the new revenue (not yet taxed) added each year to equity. In fact, the market value of personal wealth is unknown, because stocks and real estate, for example, are variable.

Raising tax rates on state or municipal property, such as IPTU (urban property), ITR (rural property), IPVA (car), ITBI (property transfer) and ITCMD (inheritance and donation), brings the political risk of only scare all smallholders, imagining they have something to lose, even if it is little. Among them are the thousands who own their own homes (3/4 of the residents) and cars, located in intermediate income classes.

The richest know very well how to manipulate public opinion to present their problem of paying previously exempt taxes like all taxpayers. To check… without much hope of fiscal justice.

*Fernando Nogueira da Costa He is a full professor at the Institute of Economics at Unicamp. Author, among other books, of Brazil of banks (EDUSP).


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