In an interview, Breno Vasconcelos, professor at Insper, provides details on the survey’s design, structure, and main conclusions
Following the joint efforts of the entire Insper Community to mitigate the impact of COVID-19, we are publishing a series of interviews with professors, managers, deans, and directors to address actions taken by our school, as well as tips and guidelines in the most diverse fields, to help overcome the challenges of this period.
In the interview that follows, Breno Ferreira Martins Vasconcelos, who is a professor at Insper, explains the exclusive survey carried out by the Taxation Department of Insper’s Center for Regulation and Democracy that shows a list of 166 tax measures adopted in 43 countries:
1) How did the idea of conducting this survey come about?
The crisis took the world by surprise. Despite warnings from scientists, the speed with which it has escalated has put pressure on public administrations around the world to formulate responses not only to health demands but also to economic ones.
In Brazil, a country that was already slowly moving out of a persistent economic crisis, the difficulty in providing these responses seemed to us even greater, which motivated us to study the experience of other countries in our field of study, which is taxation.
Thus, we had started an exploratory study to identify tax instruments that these nations had adopted to assist taxpayers. Our intention was to provide a detailed and comprehensive mapping of measures that, with adaptations, the Brazilian tax Administration can adopt at the federal, state, and city levels.
2) How is this survey structured?
The survey contains a mapping of tax measures adopted by 43 countries, classified according to the tax category (customs, consumption, payroll, property, and income) and the scope, which can be horizontal (generally applicable) or vertical (actions focused on sectors or groups of people). We carried out the first phase of the study, in which we summarized those data to identify the most adopted measures in general — which we had categorized between tax returns, deferral of ancillary obligations, deferral of taxes, reduction of the tax burden, reduction of late charges and others —, and also identified which measures are the most adopted per tax category.
In the second phase, which is in progress, we will compare those data with the tax measures adopted in Brazil and analyze which other measures can be adopted by the Brazilian government, in the tax sphere, to protect corporate liquidity during the crisis.
3) What are the main conclusions so far?
In the first phase, we mapped 166 measures countries had adopted and verified that half corresponded to the deferral of taxes, followed by tax burden reduction, and the deferral of ancillary obligations. This finding shows that countries are in line with the OECD recommendation that postponing tax payments is one of the primary measures to immediately safeguard corporate liquidity, which is essential not only for keeping employees but also the economy functioning.
We also found that most of the measures covered income taxes, followed by consumption taxes, which is probably because this taxation is levied on the reality of individuals and legal persons regularly, usually on a monthly basis.
Therefore, avoiding or postponing such monthly incidences is an effective way to improve companies’ cash flow.
4) How can this study help the Brazilian government to make the best tax decisions?
With the proper adaptation to the Brazilian tax reality, the international experience serves as a valuable guide for decision-making. Thus, the government will be able to evaluate the policies implemented by other countries, especially regarding the criteria and individuals or legal persons covered, to study which measures are applicable and would generate quick but, at the same time, long-term sustainable effects in Brazil.
5) In your view, what are the most urgent tax measures that need to be taken in Brazil?
Immediately, it is important to postpone the due date of taxes that are levied periodically, such as the PIS’ (the Brazilian Social Integration Program)/COFINS’ (Contribution for the Financing of Social Security) ones, and employer social security contributions — which is a measure that the government had already announced.
It also would be important, considering the data we mapped in our study, to postpone the monthly anticipations of taxation on income, which in Brazil exist in the form of monthly estimates of the IRPJ (corporate income tax) and CSLL (social contribution on net profits), both for legal persons, and carnê-Leão (the payment voucher for taxes on foreign-source income), aimed at individuals.
It is also vital to change the maturity of ICMS (Tax on the Circulation of Goods and Services) and ISS (municipal service tax), which are consumption taxes that are due on an accrual basis, that is, after the issuance of an invoice, even if the customer defaults the invoice. Concerning the ICMS, this situation is further aggravated by the existence of several hypotheses of tax substitution, in which the first link in the chain is responsible for the payment of the tax due in all other stages.
It should also be noted that, at the end of the tax deferral period, companies likely will be in a weakened financial situation and will still have to bear their current tax burden, so that the ideal would be to provide for the possibility of paying these deferred taxes in installments.
Survey – Check, on the complete survey, the main tax bases changed, and the types of measures implemented.
Breno Ferreira Martins Vasconcelos is a Professor of our Graduate Program in Tax Law and Researcher at Insper. He also serves as a Researcher and Professor at the Sao Paulo Law School at Fundação Getulio Vargas (FGV Direito SP). Prof. Vasconcelos has an LL.M. degree in Tax Law from the University of Bologna, Italy, and also holds a Masters in Tax Law from the Pontifical Catholic University of Sao Paulo (PUC-SP). Besides, he is a Ph.D. student in Law and Development at FGV-SP and serves as a lawyer.
Launch of Insper's new Graduate Program in Social Urbanism brings together students, professors, and partner institutions