South America has been a special part of my life for four decades. I have lived many years in Brasil and Peru. I am married to an incredible lady from Argentina. I want to share South America with you.
You cannot stay one day in Brazil without hearing someone complain about high taxes and poor public services. According to this narrative, the prices of everything from cars to beauty products are inflated by opaque taxes even as the nation struggles with sub-standard hospitals, inadequate public transport and other services.
Now a study from a consulting company, Brazilian Institute of Planning and Taxation (IBPT), seems to bear out the common perception about Brazil’s tax burden. It ranked Brazil last in a list of the 30 countries judged by taxation versus quality of services.
Topping the list was the US, Australia and South Korea. Among emerging markets, Slovakia ranked 11th and Uruguay 13th. Surprisingly, even Argentina, with its problems with inflation and chaotic economic policies, ranked higher than Brazil.
The IBPT based its study on figures measuring the tax burden (government revenue relative to gross domestic product) from the Organization for Economic Cooperation and Development (OECD) against the latest findings for the Human Development Index (HDI) of the United Nations Development Programme.
When Brazil returned from dictatorship to democracy in 1986, its tax burden was 22 per cent of GDP. Today this is over 36 per cent. Among its peers in the so-called BRICS group of large emerging nations, Russia’s tax burden is 23 per cent, China 20 per cent, India 13 per cent and South Africa 18 per cent.
Brazilians say they work five months a year to pay their taxes to the government. Now they are beginning to demand a return for their money. Last year, during nation-wide protests in June, citizens demanded “Fifa standard” hospitals, mimicking the international football organisation’s demands that Brazil build state-of-the-art stadiums for this year’s World Cup. But to some extent it is not only the government’s fault that Brazilians pay high taxes.
The problem is cultural. “It’s a problem of the government and the society. There is a mindset here that public resources belong to nobody. Brazilians don’t realize how much tax they actually pay,” says Carlos Melo, a political scientist at Insper.
Last year, the government passed a law forcing companies to spell out for consumers on receipts each tax included in their bill. In a receipt at a gas station at March this year, for example, from R$100 paid for the petrol, R$28.63 was taxes. “The state is too big and very inefficient, it raises a lot and ends up doing little,” says Melo.
The danger for the government will be when more Brazilians wake up to theproblem. If the information on the receipts is not enough, the IBPT spells it out even more plainly in another initiative, the “impostômetro” - an electronic display in the centre of São Paulo that shows in real-time the amount of tax collected at any givenmoment for that year.
If Brazil’s government keeps growing at this rate, one wonders how many more “0″s the impostômetro will have to add to keep pace.