Technology giants pay 76% less profit taxes in Brazil, survey shows – 04/07/2021 – Market

The technology giants in Brazil pay a 76% lower tax on profit than other companies, points out a survey by deputy João Maia (PL-RN) based on data from the Federal Revenue Service.

The study states that companies like Google and Facebook pay IRPJ (Corporate Income Tax) and CSLL (Social Contribution on Net Income) amounts corresponding to 4.4% of net income. For other companies, the percentage is 19.1%.

“The large technology companies together have a market value 2.5 times the GDP [Produto Interno Bruto] Brazilian, but they employ little in the country and collect less than other companies. In addition to being fiscally unfair, this creates unfair competition, ”says the deputy in an interview.

The survey, published by Valor Econômico newspaper, does not detail the amount paid by individual companies – since the data is protected by law. Instead, the deputy analyzed the segments in which they fit in Brazil and considered only the largest of each branch (establishing, as a cut-off line, a global annual turnover above R $ 3 billion).

The filtering resulted in 11 companies analyzed in four groups of the National Classification of Economic Activities (CNAE) used by the technology giants. Google, for example, has CNAE 63 (information service provision activities). Facebook, CNAE 73 (advertising and market research).

“This points to the sense that global internet companies that invoice more than R $ 3 billion annually pay on average about 25% of the taxes on the net profit of companies in other sectors”, states the text of the survey, signed by advisers of the deputy.

The authors claim that the tax discrepancy with other companies occurs because multinationals can send their profits to jurisdictions where they are taxed at lower effective rates. “This shift in profits from Brazil to other countries makes them pay less taxes,” they say.

When sending funds abroad, however, companies end up paying taxes to Brazil. Even so, the authors of the survey remember that amounts sent can often be deducted from the calculation basis of the IRPJ and CSLL (which, in practice, would represent an exchange of a 34% tax in Brazil for a 15% tax in the remittance) .

With the aim of offsetting the effects, Maia presented a bill almost 23 years ago (2358/2020) that creates a Cide (Contribution for Intervention in the Economic Domain) to be charged only to multinational technology companies with global revenues above R $ 3 billion.

A rate of 1% to 5% would be applied on the gross revenue and the resources would be allocated to a fund to finance the scientific and technological development of the country. The technology company that only operates in Brazil would not be charged because, according to the deputy, it would not be able to transfer the profit to branches abroad.

Sought, the big technology companies say they pay their obligations properly. “Google is an important contributor in Brazil. We operate in accordance with all local tax laws and regularly pay all taxes that are payable by technology companies in Brazil, at the federal, state and municipal levels ”, says the company in a note.

“Facebook is among the largest taxpayers in Brazil and collects the same federal taxes as other companies in the service sector, including with the same rates and calculation bases,” says Facebook in a note.

Brasscom (Association of Information and Communication Technology Companies) preferred not to comment at this point, stating that the topic is complex and that the data requires further analysis.

At the Ministry of Economy, the subject of technology giants has not been debated by members of the portfolio in tax reform discussions even after Minister Paulo Guedes (Economy) signaled in October last year a possible initiative of this type.

According to members of the economic team heard by the sheet, there are no changes studied by the Executive in relation to the theme. Sought, the IRS preferred not to manifest.

Worldwide, taxation on technology companies and other multinationals has been the target of efforts for change.

Janet Yellen, the Secretary of the Treasury of the United States, defended last Monday (5) the adoption of a minimum global rate for corporate taxes, starting the efforts of the Biden government to help increase the collection of States States and prevent companies from shifting profits out of the country in order to evade taxes.

The OECD (Organization for Economic Cooperation and Development), in a coordinated action with the United States, has been working to develop a new international tax architecture that would include a minimum worldwide rate for multinational companies to combat the transfer of profits to favorable jurisdictions.

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