Lula needs to raise taxes and also make the burden more progressive, say experts

Brazil needs to raise the tax burden to finance increased social welfare spending, and this can be done through reforms that increase taxation of the richest.

This is the assessment of specialists participating in a debate on taxation held on Monday (21) and Tuesday (22) at FEA (Faculty of Economics and Administration at USP).

Among them are Esther Dweck, a member of the president-elect’s budget transition team, and Felipe Salto, São Paulo’s Secretary of Finance and Planning, who has also collaborated with the incoming government.

Dweck stated that the discussion of a new tax rule by the Luiz Inácio Lula da Silva (PT) government needs to be linked to the search for more progressive taxation, that is, one that burdens the richest.

The former federal budget secretary claims that the level of taxation in Brazil is close to that seen in countries with a robust social welfare state and that those who pay less tax are precisely those who try to convey the idea that the burden is very high. in the country.

According to her, taxation should not be seen as a “burden”, but as a resource redistribution pact.

“We should consolidate a welfare state in Brazil, which needs more resources, and has to have higher taxation to allow this”, he said during a seminar on taxation in Brazil organized by Made (Centro de Pesquisa em Macroeconomia of Inequalities of FEA/USP) and by LabPub.

Felipe Salto also says he sees the need for higher taxation to finance a growing demand for social spending.

“The tax burden will have to increase. There will be no debt/GDP stabilization if there is no increase, but we are going to do this correctly, progressively,” said the São Paulo State Finance Secretary, who handed the transition team a proposal of a new fiscal rule to replace the spending cap, as anticipated by the Sheet🇧🇷

Vilma Pinto, director of IFI (Instituição Fiscal Independente), says that Brazil has a level of taxation similar to that of the OECD, a group of emerging and developed countries, but has lower taxation on income and property, and more on consumption and payroll.

A study prepared by Vilma shows that, in general, the higher the tax burden, the less unequal the country. Brazil is an exception to this rule.

Experts estimate that convincing voters and parliamentarians to change the tax burden will not be a simple task.

A survey coordinated by Professor Marta Arretche, from the FFLCH (Faculty of Philosophy, Letters and Human Sciences at USP), shows that only 5% of the tax proposals that have been processed in the Legislative since the Constitution have a progressive nature.

That is if measures such as exemption from the basic food basket, revocation of the exemption of profits and dividends, correction of the individual income tax table and tax on large fortunes, for example, are included in the list.

“Congress’s dominant preference is for granting exemptions and tax benefits. Progressive proposals are frankly in the minority among the proposals presented”, says the professor.

“If we adopt a more rigorous criterion on progressivity, this percentage is a trait, less than 1%”, says Arretche, highlighting the PSOL as practically the only party with really progressive proposals for taxation.

She claims that this percentage remained low when the left was in power and increased when this political field became opposition.

But he says that this cannot be understood as an anticipation of what the next government will do from 2023 onwards, as the period 2003-2016 was marked by strong growth in revenues that may have contributed to postpone reforms in this regard.

Based on other studies, she says she does not see the electorate’s willingness to increase the tax burden, except in the case of a proposal that makes clear the gains and benefits of higher taxation.

“There would be provision if this were linked to the explanation of gains and benefits, what the purpose of the collected resources is and who will pay more. This is crucial to have voter support.”