Sunday, June 26, 2011

Taxes in Brazil


This is a sore subject for most Brazilians. Taxes in Brazil are outrageous. Everything is more expensive because of the taxes levied on them. It is generally understood that the high level of tax evasion among individuals and businesses is a direct result of the stupendously high tax rates at every turn. There is a campaign underway to educate residents as to just how ridiculously high their taxes are (on everything) and to get the government to simplify the tax system (lowering many consumer taxes) and thereby lower the rate of tax evasion.  A more sane taxing system would cost most people less, and raise more revenue for the government – or so goes the argument.

Remember that I am just a simple guy. I am not a tax accountant or attorney.  The information posted here is what I could learn from various web resources. So please do not take this as totally accurate.  If tax issues are your concern, consult a professional.
Let’s take a look at the overall tax situation for folks living in Brazil. [I got much of this information from this website.]
There’s the income tax. All Brazilians and foreign residents are subject to this tax. There are five categories for taxpayers:

Monthly Salary
Percentage
Deduction
R$1,434.59
Exempt
0
R$1,434.59 to 2,150.00
7.5%
R$107.59
R$2,150.01 to 2,866.70
15%
R$268.84
R$2,866.71 to 3,582.00
22.5%
R$483.84
above R$3,582.00
27.5%
R$662.94

Other taxes include:  taxes on services.  That is, for example, if you are a taxi driver, 2 -5% of your earnings are paid to your local jurisdiction (percentage varies by locality).
Inheritance tax. This is typically 8% on the value of your inheritance, but your local state may boost this a bit.
Tax on motor vehicles. This tax is based on the value of your vehicle and is paid annually.
Property tax. For urban and suburban property, the rate varies from 0.3 – 2%; rural property is taxed from 0.3 – 20%
Real estate transfer tax (paid by the buyer). This tax varies from 0.5 – 6%
Social Security tax (INSS).

Monthly Salary
Percentage
Up to R$911.70
8 percent
R$911.71 to R$1,519.50
9 percent
More than R$3,038.99
11 percent

And those are just the taxes you can see.
There are also taxes levied on virtually all the products Brazilians consume. Here is a 9 page pdf that lists scores of products from every sector and the taxes levied on them.  It is shocking. Nothing escapes the tax man.

Let me list some things. These are direct consumption taxes (not import taxes):
A soccer ball – 46.49%
A wooden chair – 30.57%
Cigarettes – 80.42%
Christmas tree ornaments – 48.02%
Books – 15.52%
Plastic masks – 43.93%
Sunscreen – 41.74%
A couch – 34.50%
Perfume (not imported) 69.13%
Perfume (imported) – 78.43%
A bikini - 33.44%
Clothes in general – 34.67%
Rice – 15.34%
Sugar 32.33%
Ketchup – 40.96%
Powdered milk – 28.17%
Bread – 16.86%
Microwave popcorn – 34.99%
Band-Aids – 30.39%
Dish washing liquid – 30.37%
Toothpaste – 34.67%
Shampoo – 44.20%
A pen – 47.78%
A pencil – 34.99%
Mineral water – 43.91%
Beer – 54.80%
Soda in a can – 45.80%
A bath towel – 26.05%
A DVD – 44.20%
A video game – 72.18%
A refrigerator – 46.98%
A cell phone – 39.80%
A day at the beauty salon – 26.32%
Going to the theater or a movie – 30.25%
A saxophone – 40.26%
A guitar – 38.77%
Cough syrup – 34.80%
Cachaça – 81.87%

WHERE DOES THIS MONEY GO!?
I guess one of the realities is that these taxes are never collected.  The rates are so high and the system so complicated that many businesses find their way around paying the full amount. And given the taxes, by the time the product makes it to the consumer, we are paying a ridiculously inflated price.
It seem like if you could get involved in some aspect of governmental reform here in Brazil – tax reform would be a good place to start – and would bring a hefty return with success.

MORE good tax info (and some taxes I have not included here) can be found here.

10 comments:

Rachel said...

Someone has to pay for all the Corollas and Mercedes of the politicians. That and Sergio Cabral's helicopters (he borrows them... sure)

Carlos said...
This comment has been removed by the author.
Carlos said...

These are not only direct consumption taxes.
Direct consumption taxes in Brazil are IPI and ICMS.
IPI is 0 (zero) for many products, including food and clothes. Personal computers IPI is near zero.
ICMS ranges from 12% to 18%, when not reduced by some benefit.

Our tax system is not good, and taxes are really high for what we get.
But the difference in tax rates from Brazil to other countries are not as big as some rich persons and companies want us to believe.
Do you know how many millionaires do we have in Brazil?
Most of our politicians are disgusting, but do you think they own most of the Corollas and Mercedes?
If people did the math, they would realize the price differences from Brazil to the US (take personal computers, for example) cannot be caused mostly by taxes.
It´s very convenient for a businessman to put all the blame on taxes.
It´s also very convenient for us to believe in them. This way we can also not pay our taxes and keep thinking of ourselves as honest people, because we have a “good reason” for not paying them.

Gene Whitmer said...

Great post!

I feel like ranting, but won't.

ExpatBrazil

Ray and Gil said...

Great post Jim,

It is mind boggling that basic food item such as Sugar and Rice are so highly taxed.
Also revolting to see high taxes on books and school supplies.
I have to say, the funniest thing is to hear people talking about the little Corollas as if they were a luxury car.
In my opinion, nobody will ever be successful in tax reform, because of the simple fact that the taxes are money already spent, I mean, the politicians, the whole "system" desperately needs these taxes to keep their standards, the HIGH salaries, the high retirement salaries for public workers. That money needs to come from some place.
Perhaps a smart politician could lower taxes on basic items such as Sugar, Rice, Books and School supplies and increase the taxes on cigarettes, liquor, beer, tanning products and such to off set the loss in revenue from the products with tax reduction.
Until they find a replacement fund to support their entitlements, they have no other option but to keep sticking it to the middle class.
I prefer not to think about it, in order to prevent an aneurysm.

Ray

Greg said...

Someone has to pay for all of the free medical and other social programs here in Brazil. Wait till the bill comes due in the US with Obamacare!

I'm not saying that it is a bad thing, I would rather the money go to these kinds of programs than some over-bloated military budget or corporate bailout.

Nothing in life is free. Someone somewhere has to pay for it.

With that said, politicians will always skim off the public funds - they always have (since ancient times) and always will. I don't think any civilization has ever been successful at preventing this corruption.

Anonymous said...

Jim said: "WHERE DOES THIS MONEY GO!?I guess one of the realities is that these taxes are never collected."
I think he is right about that. It is also true that the public sector is less efficient in Brazil than in developed countries.
But there are other factors to consider.
Brazil collects much less money per capita than developed coutries.
For those who want to understand better this subject:
http://oleododiabo.blogspot.com/2011/04/falacia-da-carga-tributaria-no-brasil.html

Jim said...

I'm happy to pay high taxes, if the money actually get recycled into education, healthcare and infrastructure. So far I'm not convinced this is the case here.

Born Again Brazilian said...

Tax talk in general makes me a little bit sick to my stomach. All I can say is that we are paying a little bit less in taxes than we were in NYC - the combination of a high state tax and a high city tax was really mind boggling. And the car thing is hilarious. I had a Corolla out of college - they are/were for sensible people - good value/good milage. But no means a luxury car, yet here...

Ted said...

Seems like some taxes are less then London or Warsaw.