PT and the new CPMF

Around twenty PT (Workers' Party) deputies want to recreate the CPMF (Provisional Contribution on Financial Transactions) to finance the health sector. The new tax, now called CSS (Social Contribution for Health), would have a rate of 0,15% on the debit of financial transactions, which would guarantee revenue of around R$ 30 billion per year.

The government tried to bring back the CPMF tax in 2011 but failed. Now the initiative comes from a group of PT (Workers' Party) parliamentarians, whose strategy is to solidify the idea in 2014 so that the debate gains momentum in Congress starting in 2015.

It should be noted that the collection of the CPMF (Provisional Contribution on Financial Transactions) for approximately eleven years in Brazil had a positive side, testing the effectiveness of a tax on financial transactions, which was then completely unknown. The experience between 1997 and 2007 proved that this type of tax is an efficient form of revenue collection, with enormous potential for generating income and low cost. It is a fair tax, as it eliminates tax evasion, a phenomenon that concentrates income in the wealthiest segments of the population.

It's worth remembering that the CPMF (Provisional Contribution on Financial Transactions) was rejected as yet another tax that would increase the Brazilian tax burden. However, it would be accepted by society if it were instituted as a substitute for other taxes. A survey conducted in 2007 by the company Cepac-Pesquisa & Comunicação reveals that 64% of people would accept it if it replaced the INSS (National Institute of Social Security) contribution levied on companies' payrolls.

Even though it is an operationally fair and efficient tax, the creation of the CSS increases the tax burden and allows the continued exploitation of the Brazilian taxpayer. Weighing the arguments for and against, the PT (Workers' Party) parliamentarians should abandon the proposal to implement the new tax.

First of all, the CSS (Social Security Contribution) should be rejected because it does not replace any of the current taxes, which are exorbitant, unfair, distorting, and inefficient. It will only be another tax that will contribute to increasing the tax burden on the productive sector and the middle class. Furthermore, it is worth remembering that when the CPMF (Provisional Contribution on Financial Transactions) was abolished, the government compensated for this loss by increasing the IOF (Tax on Financial Operations) rate, whose revenue jumped from R$ 5 billion in 2007 to R$ 20 billion the following year.

Another point is that the government needs to undertake a broad and radical tax reform, and any patchwork solution, however necessary, will only provide more breathing room for maintaining the current dysfunctional structure. It takes courage to dismantle the current model. Continuing it, through a tax that will merely be a makeshift way to raise more revenue, serves to perpetuate the suffering of the taxpayer.

Finally, maintaining the current system supported by yet another tax will exacerbate social distortions that a tax reform should correct. One of the forces concentrating income in Brazil lies in the tax structure, which is regressive and vulnerable to evasion. The rich find loopholes to evade taxes, and the middle class is penalized in a compensatory way by paying more taxes on wages and consumption.

Common sense dictates that the CSS (Social Security Contribution) should be rejected. It would be commendable if these representatives were to advocate for a tax reform that would recreate the CPMF (Provisional Contribution on Financial Transactions) to replace taxes such as, for example, employer's INSS (National Social Security Institute) contributions, COFINS (Contribution to Social Security Financing), and ICMS (Tax on Circulation of Goods and Services). This would be an action in line with the country's needs.