Understand why government tax collection is breaking successive records during the pandemic

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Despite the indication of greater economic growth, the increase in tax revenue is also linked to negative factors, such as rising inflation and the closure of small businesses.

WILTON JUNIOR/ESTADÃO CONTENTFederal revenue set a record in 2021 by raising R$1.9 trillion in taxes and contributions

The collection of federal government with taxes and contributions set a new record in January, totaling 235.3 billion reais, an increase of 18.3% compared to the first month of last year, according to data from the IRS released this Wednesday 23. The level is the most expressive since the historical series began, in 1995, and follows the records accumulated throughout 2021, which closed with the unprecedented sum of 1.87 trillion reais collected by tax In the 12 months of last year, the collection was not the highest in the series in just four (January, June, October and November). Despite the data celebrated by the Minister of the Economy, Paul GuedesAs an indication of the recovery of economic activities after the fall caused by the pandemic, analysts point out that the extraordinary results are more related to negative factors, such as rising inflation, the concentration of income in large companies and the indebtedness of the federal machine in the middle of the crisis.

The data published by the Federal Revenue are already corrected for the country’s official inflation, measured by the Broad consumer price indicator (IPCA). For the professor and coordinator of the Álvares Penteado School of Commerce (Fecap) Foundation, Tiago Slavov, despite the IPCA covering dozens of products, there are factors that underestimate the data with distortions generated by the pandemic. “Some items showed a negative price change, such as those related to the service and transport sector. On the other hand, consumer goods were in strong demand, with price increases. As consumer goods are, in the current tax model, taxed more than services, this change may also explain the increase in collection,” he explains. The readjustments caused by inflation are not limited to modifying the calculation base of companies. As many wages are readjusted by the variation in prices, part of the wages came out of the exemption brackets and began to be taxed by the Income tax, helping to fatten the coffers of the IRS. “It does not imply an improvement in the economy, only that the salary has been readjusted due to the increase in inflation.”

The IPCA recorded a rise of 10.06% in 2021, the highest record in six years. The massive stimulus packages for economic activities and the distribution of cash promoted by countries around the world at the start of the pandemic fueled the inflation scale in the world’s major economies. In Brazil, most of these benefits were paid for with public debt, which increased the amount of money in circulation. According to financial markets professor at IBMec in São Paulo, George Sales, the move has injected R$1.4 trillion into the economy since 2020, increasing federal government debt by 33%. “The government did not get this money by improving the economy, but by issuing debt. All of this leaves the conditions at another level, and this expressive increase in collection is because the country is at this high level,” he says.

The federal tax office highlighted the extraordinary increase of R$40 billion in corporate income tax (IRPJ) and social contribution on net income (CSLL) for the record of 2021. The data shows that the companies have made more profits, and therefore the share of taxation becomes bigger. For Slavov, of Fecap, the measure also means a greater concentration of economic power in the hands of large groups in the midst of a pandemic, while small businesses have been more affected by the crisis. “Small businesses, which are taxed less, have been hit hard and many businesses have closed. Large companies, which are more supervised and subject to tax, have concentrated this profit,” he explains. “It becomes an economic problem, as small and medium-sized businesses end up losing ground. It’s a bad sign that entrepreneurs are being harmed,” he says. Improving tax authorities‘ mechanisms to prevent tax evasion also results in increased revenue. The scenario, however, reveals the weight that the federal government places on the activities. “If on the one hand it is good for tax justice, on the other hand it shows high tax pressure, which leads to discussions about reform,” says Slavov.

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