The new report about Brazil made by "The Economis" (the one that is basically reverting everything good they have said about Brazil a few years ago) mentions a curious expression: "Peter Pan firms in Brazil".
The expression was not foreign to me, but I hadn't heard it in years.
I think Economist wanted to describe the small and medium-sized business that are under the "SIMPLES" regime of taxation.
SIMPLES is a tax regime that allows for a total tax burden as low as 5% over the gross revenues of the company. The taxation increases as a percentage in proportion to the monthly sales/income. That is, a small business selling 1 thousand dollars a month would pay 5%, and a medium company selling 750 thousand reais a month would pay 12%. And so on.
In view of this tax escalation, many people choose to keep their companies small (very small, as in a hot dog stand), just to avoid any increase in taxation. Such companies never grow, and thus the Peter Pan metaphor.
I write little about this because COMPANIES WITH PARTNERS THAT LIVE ABROAD CANNOT JOIN THE SIMPLES TAX REGIME. Since most of my work is helping foreigners who want to invest in here, I choose to focus on the more traditional tax regimes (assumed profits system and real profits system).
On top of that, I despise SIMPLES, because I see it as a kind of government fraud. The system was designed to keep poor people poor. The Peter Pan effect is no accident.
But, since the expression caught my eye and since the number of foreigners who choose to move to Brazil is increasing, I thought it would be a good idea to mention SIMPLES, in spite of its problems.
Steve • Having dealt with Brazil for many years, the "It is simple" was introduced to demystify the tax structure for Brazilians who were not paying tax at all, but started to pay tax because they saw this as a way to enter the main stream economy at a low 5% rate. Furthermore, the government kept the rate low in order to add more taxpayers to the tax list, collecting of course, other relevant information. As a rule of thumb, having to pay more tax on increased sales/profit has never been a deterrent for increasing the growth of professionally managed company.
ResponderExcluirHello Steve,
ExcluirI can't agree with you. What you say is what the government says it has planned, and the conclusion you are declaring are the results that the government wished were being achieved.
Actually, the number of small companies turning medium, and medium turning big does not have a clear connection with SIMPLES. On the other hand, the overwhelming majority of small companies either go bankrupt in a few years or remain small.
Regards,
What I am saying is that companies go bankrupt or remain small because of other reasons and not because of SIMPLES. I gave you a hint by stating one reason for bankruptcy or small growth, among many other reasons, "professionally managed", Many small and medium size companies, and even larger companies are family owned and are not "professionally managed". Hence, the bankruptcy and small growth. I say SIMPLES has NO connection to growth and therefore, irrelevant to the stimulation of growth
ResponderExcluirRodolfo) • Hi Adler, two questions: if Brasil government is promoting foreign investment in pursuance of BRICS, why would SIMPLES still be a challenge? Could also be a challenge for let's say virtual technologies deployed in the internet Cloud?
ResponderExcluirRudy, I didn't understand you questions.
ExcluirMaybe you are wondering if SIMPLES wouldn't be helpful for tech companies?
Well, several technical activies are excluded from simples. Also, SIMPLES companies can't have foreign companies as partners,and can't be the exclusive agents or distributors for foreign companies.
Adler