Surplus of R$ 95 million in public accounts

Brasilia 247 – For the first time in the last four years, the government of the Federal District (GDF) has presented a positive financial result in its public accounts. Since 2011, the local government has been working to reduce expenses and focus investments on priority areas.

To meet the established goals, the government launched a plan in February to cut spending and increase tax revenue.

In an effort to increase tax revenue without raising taxes, the Finance Department invested in enforcement and expanded the Nota Legal benefits program, which now has around 500 registered taxpayers.

Last week, the Secretary of Finance, Marcelo Piancastelli, and the Secretary of Planning, Luiz Paulo Barreto, went to the Legislative Chamber of the Federal District (CLDF) to show how the government's public accounts are doing.

Check out Piancastelli's interview with Brasilia AgencyThe secretary gives an overview of the initial results of the leaner administration of the Federal District Government.

You gave an interview at the beginning of the year and announced that 2012 would be the year of prudence in government spending. What has been done in the last four and a half months to control these expenses?

We said it would be the year of prudence because we managed to get the Federal District's finances back on track. That is to say, the financial execution of the budget is running perfectly normally. We met all deadlines, left nothing behind, no outstanding debts, no outstanding payments. We closed the 2011 budget on April 15th and cancelled all unprocessed outstanding payments. If those bills, which were from last year, hadn't been paid by April 15th, 2012 – that is, in three and a half months – then it's because they weren't that urgent. We cancelled them all and closed the year 2011.

And why caution?

Because we noticed that personnel expenses rose excessively in 2011, for a number of reasons. The current administration inherited R$ 620 million in salary increases approved by law in the previous administration – which resulted in a very large impact. Furthermore, due to government policy, we had to raise the salaries of teachers, doctors, and other social categories, because it is part of this government's platform to guarantee better healthcare and better quality education, for example. Therefore, in 2012 we will have to be more prudent in terms of increases, so as not to exceed legal limits.

In that same interview, you specifically defined this reduction in payroll expenses as a goal for this year. Has this objective been achieved over these past months?

Yes. We don't have a specific target. We have an upward target that we can't reach. I'd say it's an anti-target, which, incidentally, we've never reached. Even so, we need to reduce the share of personnel expenses in terms of net current revenue as much as possible, so that the government has room to build a constructive, long-term personnel policy. For example, to restructure careers, to improve the careers of various segments. If there are any salary implications, our action is restricted, but when there is room, we can do it. This doesn't simply mean giving a salary increase, but adapting careers to the needs of public service and serving the population.

Let's talk about one of these services for the public, which also helps with tax collection: the Nota Legal program. There has been a significant increase in the number of taxpayers who have indicated credits from their purchases for the payment of IPTU (property tax) and IPVA (vehicle tax). To what do you attribute this popular participation?

The department made a statement that naturally impacted this increase, but it's logical behavior: who doesn't like paying less tax? If every month you have to go grocery shopping, make other purchases, pay ISS [Service Tax]. If you ask for a receipt, you accumulate credits and pay less IPTU [Property Tax] and less IPVA [Vehicle Tax]. It's zero cost. Today we have almost 500 people registered in the Nota Legal program.

What is the effect of this?

Me, you, all of us, when we go to the bakery, the supermarket, anywhere, and demand a tax receipt, we are obligating the merchant to issue a receipt. So, this has an effect on tax collection. Another effect was that people, in order not to lose the advantage of the tax receipt program, settled their debts with the tax authorities – they would have settled them anyway, but it accelerated the process. This caused our tax collection to increase. The population has its own financial logic. Nobody is naive.

In other words, besides increasing state revenue, is it also a policy to combat tax evasion?

That's right. As I mentioned the other day in the [Federal District] Legislative Chamber, we found a completely disorganized tax collection structure for the department, needing to be rebuilt and recovered. The tax checkpoints were deteriorated and abandoned. We are rebuilding the entire structure to monitor the entry of goods through the roads of the Federal District.

This also brings up the debate surrounding the tax war.

Yes. Because if you don't have oversight, you can send any merchandise, from any state, without taxes, and compete with companies in the Federal District, which are at a disadvantage.

The Federal District government, by the way, is coordinating with governments of other states to resolve this problem of the fiscal war. How is that coordination going?

There is a coordinated movement underway, led by the Ministry of Finance and involving the Federal District government along with state governments, to submit a proposal to the National Council of Finance Policy (Confaz) that resolves all outstanding issues related to tax incentives. Following this, no state would be able to issue new incentives. An interstate tax rate would be established, which needs Senate approval and would effectively represent the end of the tax war.

You and the Planning Secretary, Luiz Paulo Barreto, went to the Legislative Chamber last Wednesday (16) to present the budget execution for the third quarter of 2011. What was the announced result?

The execution was favorable. We had a budget result of R$ 660 million – this doesn't mean cash, but it's in the budget. And we had a primary surplus – this does represent cash – of R$ 95 million. For the first time in four years, the Federal District had a positive primary result.

To what do you attribute this surplus?

Regarding the effort made at the end of the year to organize the finances. Previously, all secretaries committed their entire budget and didn't spend it. When the year ended, it remained committed and was accounted for as a loss. What we did was clean up the list of commitments. All unprocessed commitments were settled.

The Federal District Government (GDF) is preparing to present the results of its budget execution for the entire year of 2011. Will it be as good as the results of the third quarter?

No. It will be better. Personnel expenses as a percentage of net current revenue will be lower, but I can't say anything more than that.