Archive | May, 2011

Tax Transparency and a Fairer Brazil

26 May

The worst thing about Brazilians taxes—which are the heaviest of any country in the hemisphere—is not the amount of tax paid or how government often misuses them, but rather that Brazilians don’t even know how much tax they pay in the first place. This past week, the Folha de Sao Paulo reported that the average Brazilian will work from January 1 to May 29 for government, just to pay taxes. Is it fair that hard-working Brazilians spend almost half of the year working for a government that provides them with services of questionable quality and scope? It might be fair, if Brazilians knew what they were paying and how their money is being used. Unfortunately, tax and fiscal transparency in Brazil is still wanting.

If Brazil is to advance—to be a competitive, fair, and progressive country—it should make greater tax transparency a priority. Brazil urgently needs to move forward with a freedom of information law, which currently awaits passage in the Senate. Promised by President Lula da Silva but delayed since at least 2006, this law provides citizens with the regulated right to ask for specific information and obligates governments at the municipal, state, and federal levels to respond within limited timeframes. The law is a first step toward greater transparency, and it also obligates government to be more proactive in disclosing information about public funds.

Notwithstanding the soon-to-be-enacted freedom of information law, government needs to become more proactive about tax transparency. Other countries have long maintained such traditions. In Canada, gasoline stations clearly show consumers that fuel is subject to a 13 percent harmonized sales tax (federal and state), 10 percent federal excise tax, and a 14.7 percent state gasoline tax, making for a total of 37.7 percent tax. When consumers buy anything at a store, sales tax is calculated at the moment of purchase. So if I buy a radio for $100, when I go to pay I will be charged $115: 7 percent federal, 8 percent provincial tax. In this way, consumers begin to understand what they are paying, and they begin to be concerned about how government is using their money—they start to demand more accountable government.

In Brazil, by contrast, taxes are hidden: value added taxes, fuel taxes, import taxes, circulation taxes, financial taxes, industrial production taxes, among others. The cost of an average car in Brazil includes approximately 27 to 30 percent tax, according to the website, Dieta do Impostao (the Big Tax Diet), more than twice what Canadians pay, which explains why cars in Brazil are more expensive than just about anywhere else. But Brazilians are ignorant to these facts because of deficient tax transparency.

The business organization Confederacao de Industrias do Brasil (FIESP and FIRJAN, for example), is undertaking a campaign to inform Brazilian citizens how much they pay. As the insatiable Big Tax character of the Dieta da Impostao tells us, Brazilians pay 53 percent taxes on gasoline, and pay more than 70 different taxes in total.

Where does all this money go? Some important projects are being undertaken with public money, including projects that center on public infrastructure, education, and health. Yet a 2008 report by the FIESP’s DECOMTEC estimates that between 65 and 110 billion Reais are lost to corruption every year, or about 1.4 to 2.3 percent of GDP. Much of the blame can be placed on a lack of transparency, which prevents citizens and the media from effectively monitoring government. The freedom of information law now in the Senate, and urgently requiring the attention of legislators, is a first step towards a fairer, more efficient, and professional Brazil.

Impeached Ex-President Pockets Brazilian Freedom of Information Law

5 May

A surprising turn of events threatens to de-rail President Dilma Rousseff’s bid for greater governmental openness and transparency in Brazil.

Brazil was on track to pass its long awaited freedom of information (FOI) law on May 3rd, World Press Day—  a deadline set by Brazil’s President Dilma Rousseff just after President Barack Obama’s mid-March visit. More than 90 countries now possess freedom of information laws, and twelve of them are in Latin America— minus Brazil. Until Rousseff’s declaration of support in mid-April, the region’s Goliath stood out as a laggard, casting itself among the ranks of Bolivia and Venezuela, as opposed to acting like the regional and global leader it is trumped-up to be. Now once again Brazil’s commitment to greater transparency has fallen into question.

Secrecy and the Ex-President

Although President Rousseff appears to stand firmly behind the law and her popularity and support in Congress are strong, the forces of secrecy rendered a May 3rd enactment impossible to achieve. Having passed the Lower House a year ago, the bill only needed the approval of three committees in the Senate. It was approved by the first two on April 19th , but on April 25th the law failed to make it past the Committee on Foreign Relations and Defense— the last hurdle. Senator Fernando Collor, head of the Committee and a key ally of President Rousseff’s congressional coalition, pocketed the bill and refused to move it forward. Collor was President of Brazil from 1990 to 1992, when he was impeached on influence peddling and corruption charges. He returned to federal politics in 2007.

Despite a direct appeal by President Rousseff’s Chief of Staff, Antonio Palocci, Collor has refused to approve the freedom of information bill. Resistance appears to run deep; the Committee over which Collor presides, Foreign Relations and Defense, is intimately tied to Brazil’s armed forces. The military is one of the country’s best known opponents of openness and have long sought to conceal abuses committed under the 1964-1985 dictatorship. According to journalist Fernando Rodrigues from the Folha de São Paulo newspaper, Senator Collor wants to keep certain types of information secret in perpetuity, as Brazilian law currently guarantees.

On May 3rd President Rousseff promised to use her powers to discharge the bill from Committee and force a floor vote on it in two weeks time, but it is uncertain whether internal resistance has run its course.

The Sun Shining on Brazil

The passage of a freedom of information law may bring about seismic changes in Brazil. Whereas governments in Chile and Argentina have confronted the human rights violations of previous dictatorships, Brazil’s armed forces have so far vetoed attempts to examine the 1963-85 archives. President Rousseff’s allies are now struggling to gain Congress’ support for a Truth Commission, and a freedom of information of law may provide a useful tool to this end.

Citizens also need a window into government if they are going to serve as watchdogs, especially with regards to public spending. Fabiano Angélico, one of the founders of a pro-transparency movement called Brasil Aberto, cites a report by the National Comptroller General. Originally published in 2003, the report estimated that as much as 30 percent of federal funds were lost in corruption at the municipal level. With huge infrastructure initiatives in the works for the 2014 World Cup and the 2016 Olympics, not to mention national projects such as hydro dams and highways, greater scrutiny into public accounts is indispensable. Unsurprisingly, tax and fiscal reform is the business community’s top priority. At over 35 percent of GDP, Brazil’s tax burden is the heaviest in the hemisphere.

Political Lessons

The Collor incident is a lesson in political humility for the Rousseff administration, and a warning sign for the President’s reform agenda and what the freedom of information law may be up against. While on paper President Rousseff has enough legislative backers to pass constitutional amendments, her challenge remains to put this support into practice and move her reform agenda forward. With more than 25 parties in Congress, maintaining coalition support often entails more give than take, which may go some way towards explaining Rousseff’s tight-lipped tolerance for Senator Collor’s snub.

Aggressive news media reporting may help shine light on underhanded legislative moves to stymie Rousseff’s reforms. But in Brazil, news media coverage tends to be more consensual than conflictive. In contrast to the U.S., Mexico, and other countries in Latin America, media support for transparency in general, and freedom of information in particular, has been conspicuously reserved.

Assuming the law passes in the coming weeks, the next question is whether government will be able to “sacá-la do papel,” as the Brazilians say— get the law off of paper, implement and enforce it. Media and citizen support will be indispensable for attaining this goal. Brazil’s emerging ‘global consciousness’ may also be instrumental. During President Obama’s mid-March visit, Brazilian officials accepted an invitation to join an Open Government Partnership, due to be announced at the opening of the United Nations in September. This commitment provides hope that Brazil will overcome its strong historical leanings toward secrecy, and exercise the regional democratic leadership that it should rightfully assume.

More Census Results for Brazil– Inequality and Poverty

4 May

How are inequality and poverty best addressed? Successive governments have focused on conditional cash transfers, such as Bolsa Escola and Bolsa Familia, in which money goes to parents in return for keeping their children at school, among other conditions. These programs have diminished absolute poverty and helped ensure that future generation will gain the basic skills they need to move themselves out of marginalization.

Yesterday, the Jornal Globo reported that Brazil has 16.2 million people–almost 10 percent of the population–living in extreme poverty, which in Brazil is benchmarked at incomes under R$70 a month, or about $45 US.

Poverty is one issue, inequality another. Inequality ultimately speaks volumes about opportunity, and opportunity is most dependent on access to quality education. After addressing misery, education should be priority one, two, and ten.

The Folha de São Paulo reports that inequality has dropped in Brazil; it now sits at 0,5304 on the Gini Index (from zero to one). The Gini Index is the most common measure of inequality. Brazil’s worst moment for inequality was in 1990, when the rate was 0.6091. Today’s rate, oddly enough, is about the same as it was in 1960, when the Gini coefficient came in at 0.5367.  Brazil still remains among the most unequal societies in the world, however, even in the context of 2009 benchmarks, as depicted by this map.

These are sobering numbers. In spite of the progress Brazil has made over the last decade or so, many social challenges lay ahead.

Census 2010: By the Numbers

2 May

The 2010 Brazilian Census came out about a week ago, and it reveals some startling numbers.

Illiteracy

Almost 10 percent of Brazilians remain illiterate, despite the rate falling from 13.6 percent in 2000. Although this is a remarkable drop in historical terms, authorities view the reality to be much brighter for youth; the  illiterate segment of the population is concentrated in the 60-plus age group, where nearly 27 percent of people cannot read, reports the Jornal Globo.

Whiteness

Other interesting news from the 2010 census, the number of Brazilians identifying themselves as white has fallen below the 50 percent mark for the first time since census results ever began to be reported. Much of this change is chalked up to the social desirability bias; it is not necessarily that the number of whites has diminished, but borderline cases are less reluctant to categorize themselves as non-white as they were in the past. The rate of people identifying themselves as white went from 54 percent in 2000 to 48 percent today, a 6 percent drop.

Asian Growth

A surprising number, the Asian population has gone up by 173 percent, reports the Jornal Globo, accounting for over 2 million of Brazil’s 191 million people.