Brazilians pay a high price just to maintain the bureaucracy

The "Federação das Industrias do Estado de São Paulo" (FIESP) stated in a report dated 2010 that 12 percent of the Brazilian GDP, or R$46 billion is spent each year just to feed the bureaucracy in this country. That is up from the figures reported in 2004 by then Minister of Development, Luiz Fernando Ferlan who stated that it was costing 5 percent of the GDP or R$25 billion at that time.

Now, two years on you can be assured that the costs are even higher. It makes you wonder how much better off the average Brazilian would be and how much less complicated their lives would be if the government trimmed back some of the absurd and oppressive bureaucracy that suffocates Brazilians and foreigners alike.

In making their 2010 report FIESP compared the situation to twelve other countries, Germany, Australia, Canada, Chile, Singapore, South Korea, Costa Rica, The USA, Spain. Finland, Ireland and Japan. They went on to state that the informal (unregistered) businesses had reached 40% in Brazil as compared to an average of 16.5% for the 12 countries studied. "What we see is the absence of an agenda for the theme. Nothing to simplify the bureaucracy in Brazil," says José Ricardo Roriz Coelho, director of FIESP.

"What we have today is a high technical sophistication in the field of computing and storage. But a Jurassic past from the standpoint of the rights of citizens and businesses," says Antonio Carlos Rodrigues do Amaral, president for the Commission on Taxpayers' Rights for the Bar Association of São Paulo (Ordem dos Advogados do Brasil - SP)

It can take as much as 120 days to register and open a business in Brazil, which is only a slight improvement over the figure of 152 days which was quoted by Ferlan in 2004. Still when you compare that figure with the thirty days or less in most other countries it is still way too long. This combined with better methods of tracking earnings by computer and improved collection methods at the Receita Federal and with the extremely high cost to business in having to deal with one of the most complex sets of tax laws in the civilized world is what is driving more and more businesses underground, in my opinion.

I once read a report on the internet from a Canadian company (unfortunately forgot which one) which stated that they employ 300 full-time staff just to deal with taxes in their Brazilian operation while the same task is handled by three part-time employees in their Canadian operation. You can be sure that situation is something that multinational companies take a long, hard look at before making any decisions about investing in Brazil. Given that fact, the end cost to the Brazilian economy is even higher since there is no way of factoring in the loss of potential growth without knowing which companies decide not to invest here and just how much they would have invested.

Food for thought, but don't expect it to even make a ripple in Brasília... not gonna happen!

Cheers,
William James Woodward - Brazil Animator, Expat-blog Team