Tax for Shopee and friendly fire against Haddad – 04/13/2023 – André Roncaglia

It is often said that a government from the left does not need opposition from the right. The left itself takes on this task.

After the negative reaction to the new tax framework, friendly fire is now aimed at applying the import tax on online purchases. Ministry of Finance Ordinance No. 156, of June 24, 1999, established import tax exemption for international postal shipments worth up to US$ 50 (or equivalent in another currency), provided that the sender and recipient are persons physical. That is, no new tax was created.

Taking advantage of regulation, foreign e-commerce companies under-invoice and divide purchases into smaller packages, and use the fictitious names of individuals to evade taxes.

Closing tax loopholes is the obligation of any government. Driven by the need to deliver a fiscal adjustment supported by greater tax equity, Haddad has been attacking other fronts of tax avoidance and tax evasion, as mentioned in a previous article. More than 90% of efforts to expand the tax base are concentrated in large companies.

The main criticism of the measure is: by attacking tax evasion by foreign companies, the government would be reducing the purchasing power of the middle class and the poorest. However, it is necessary to consider that subsidizing foreign retail competitors that practice tax fraud is anything but development policy. Second: the ongoing exchange rate appreciation and the real appreciation of the minimum wage will offset this loss over time.

Unfair competition practices have fiscal, social and economic implications. As in the case of exemption from taxes on the basic food basket and exemption from fuel, the rich also benefit.

The regressivity of this “withholding of good” appears in other indirect effects. In view of the precariousness of employment and the low wages of 60 million informal workers in Brazil, those who work in retail are the most affected. To defend their profit margins against cutthroat competition, entrepreneurs cut jobs, close stores and increase pressure on sellers to perform.

In the long term, the economy becomes more dependent on imports and loses industrial density. In Brazil, with its early and accelerated de-industrialization, what is cheap for the consumer can be expensive for society.

It is not new that the rise of China around the world has disrupted national production chains. This “manufacture of the world” model turned the country into an economic powerhouse. However, the plan to compete for leadership in high-tech sectors such as semiconductors and quantum computing has reduced the space for low-end manufacturing in the Chinese economy.

With the Chinese Communist Party siege on application companies, the way out was to expand its operations abroad, exploring loopholes in the customs legislation of several countries. The US recently launched a task force to impose limits on unfair trade practices by Chinese companies.

In this sense, Lula’s trip to China can promote strategic partnerships with China’s leading sectors, to leverage investments in infrastructure and technology, generating better jobs in Brazil, with long-term productivity gains.

The path of development is long and cumbersome. It requires union, effort and a lot of sacrifice to escape temptations that promise quick pleasures, but generate lasting dependence.

The fuss created by this minor measure reveals the instability of the government’s support base in the face of multiple challenges and opposition obstructions. If the government does not transmit an integrated vision of development to its base, internal tensions will corrode it from within.

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