He who pays the piper, may not always call the tune. At least this is what astounding news released Wednesday June 30th, by IPEA (Applied Economic Research Institute – Brazil) have proven, and what many Brazilians have been suspecting for years. According to the Institute, the poorest 10% of the population pays 32% more taxes than their 10% wealthiest counterparts, who contribute with 22%.
The Research entitled “Public budget, who pays out and who spends in Brazil” revealed that one third of the poor population earnings is consumed through direct and indirect taxes.
Increasing the disparity, the study also pointed out that while the poorest people pay out more when it comes to taxes, those on the top of pyramid still control 75% of the nation’s wealth. even though they are contributing less.
According to Marcio Pochmann, IPEA’s President, Brazil tax system is unfair towards the poor layers of the population: “Those who are poor in Brazil are doomed to pay out more taxes; those who have less pay more”, affirmed Pochmann.”
The mansions pay less taxes than favelas (shantytowns), at the same token the favelas, the poor sectors of society are the ones who still struggle with the lack of basic services such as sanitation, or even garbage pick up. The study concluded that such situation is unacceptable in a country of such huge dimensions.
For Pochmann, the possibilities of creating additional tax brackets should be considered, since it would help determine different amounts of contributions ranging between 40 and 50%, and a minimum contributions between 3 to 5%.
Brazil tax bracket do not differentiate between rich and poor. Taxes such ICMS – Services and Products value-added sales taxes) and IPTU (Property Taxes) illustrate this fact. Per the IPEA report, Brazilian poor people have to allocate 16% of their income towards ICMS (Property tax), unlike the wealthiest who only contribute with 5%.
The IPEA has also revealed that the poor also work more per year in order to pay for their taxes. The poor (those with an income of 2 minimum wage (about US$ 400 monthly) work 197 days per year in order to afford their contributions, while citizens with an income between 5 and 30 minimum wages (US$ 1,000 and US$ 6,000) only have to work 106 to do the same. Therefore, a poor citizen works 3 months more than those with better income.
According to IPEA the economic unbalance is historical and far from being resolved, despite federal government incentive in the last few years. From 2004 to 2008, poor people have seen their taxes steadily increasing, while the wealthier part of the population remained untouched.
Just in 2008, families with a 2 minimum wage income had to contribute 53,9% of all their earning in taxes. Adding to the numbers Brazilians had to work additional 20,5 days to afford for public debt, and another 6,9 days to pay for public servants from the executive to the legal system.
IPEA statistics seem to come at a very appropriate time, as the crisis in Brazil Senate continues to mount over the suspicion of public funds misapropriation involving Brazilian senators.
Just in the beginning of this year, former Brazilian congressman, Edmar Moreira resigned following accusations of tax evasion for not declaring property tax of his castle worth 25 million Brazilian reais (US$ 12,500 million). Moreira had also been accused of misusing public funds.
Edison Bernardo DeSouza is a journalist, having graduated in Social Communication Studies at Pontifical Catholic University in São Paulo, Brazil. He lived in the US and Canada for close to 10 years and participated in volunteering activities in social works agencies. DeSouza currently lives in São Paulo where he teaches English as a Second Language for both private English Language Institute and Private High-School. He has already participated as an actor in three English plays in Brazil and is pursuing further advancements in his career. He is particularly interested in economics, history, politics and human rights articles.