More than 80% of Brazilian companies have irregularities, study shows.

Brazil Agency - A study indicates that 86% of Brazilian companies have some type of irregularity with regulatory bodies. The international organization Endeavor, which published the survey, works to promote entrepreneurship in Brazil and other countries. The issues include late tax payments or failure to comply with requirements from municipalities or the Federal Revenue Service.

In the retail sector, 96% of establishments have irregularities, while in the industrial sector, 92% of companies are not fully compliant. The research was conducted using a sample of 2.550 companies across all Brazilian states.

The study attributes the high rates of irregularity to the complexity of the country's bureaucracy. "This figure illustrates the complexity and difficulties imposed by the regulatory environment and the disparity between the demands imposed by the State and the reality of businesses," the publication states.

The organization draws attention to the fact that irregularity rates are high even among law firms (80%) and accounting firms (88%), sectors that, in theory, should be better prepared to deal with bureaucracy and regulations.

As an example of the difficulty in keeping companies compliant, the study cites that the Tax on the Circulation of Goods and Services (ICMS) had 558 updates in four years. "That is, about one update every three days. In addition to the constant changes in tax legislation, companies need to fulfill a series of ancillary obligations to prove to the tax authorities that payments and legal requirements are being met correctly," it highlights.

Inactive companies
According to the research, the difficulties caused by excessive regulations and obligations also generate a high number of companies that continue to exist without operating. The study estimates that 20% of those registered in the National Registry of Legal Entities (CNPJ) are inactive, representing 3,7 million companies.

"The high number of companies that have not formally 'closed their doors' generates a cost of inefficiency for the economy, as there are many resources – tangible and intangible – paralyzed by the inconclusive situation that could be reallocated in more productive ways, whether in a new venture or in an existing one," the document adds.

Solutions
The study also points to some measures that could reduce bureaucracy and facilitate the opening and closing of businesses. Among the proposals advocated are integrating different agencies and departments, simplifying and automating tax collection, and reversing the logic of oversight, giving more weight to self-declarations by entrepreneurs.