Gimme a break! Brazil's small-business owners are looking to improve their tax deal. Every little bit helps

Latin Trade, March, 2005 by Kenneth Rapoza

At Padaria Chandelly, a family-run bakery with seven employees on Avenida Higienopolis, owner Edemir Alves dos Santos says without simples he would have long ago joined the legions of tax evaders. Nonetheless, for a company with 30 years under its belt, growth is slow. Annual sales haven't topped $373,860. "It wouldn't be so bad if we got something in return for what we pay out in taxes, like lower energy bills, or better social services," says Santos.

The new version of the tax law purports to give small businesses a better stake in export markets by permitting companies selling similar products to create an export consortium, currently illegal in Brazil. All income earned from exports is exempt from social security and value-added taxes. Paulo Cisar Oliveira, owner of a security-alarm components company, is looking to sell products to Portugal and Mercosul. He welcomes the additional incentives. The start-up is valued at about $18,693 and is already exempt from numerous taxes because the two-man outfit earns so little.

"Over the years, Brazil's small-business owners have seen no real improvements, even in the good times" says Sergio Garcia Ozorio, a former construction-materials company owner and regional manager at the Sebrae branch in Londrina.

Those who tout the tax changes say that when, and if, Sebrae's proposal becomes law, tax evasion to the tune of $50 billion annually will trend downward. That could mean an eventual tax cut across the board, allowing businesses to generate much needed, decent-paying jobs and giving Brazilians more spending power in the long term. That should drive even more people into Vivianne Pizzol's shop, allowing her to expand. For now, she's treading water as always, hoping for change.

JOB ENGINES

Small and micro business create most of Brazil's paying work.

micro and small    56.1%
medium             10.1%
big                33.8%

Note: Table made from bar graph.

SOURCE: IBGE

KENNETH RAPOZA

LONDRINA, BRAZIL