Brazil: “Check-Tax Yourself Before You Wreck-Tax Yourself!”

https://i1.wp.com/www.sindecon-esp.org.br/arq_sys/editor/cpmf.jpg
“Fie on the CPMF!” Source: The image is hosted by the Syndicate of Economists of São Paulo, but the Web site it appears on is a “heroic resistance”-themed astroturf campaign called
Resistindo (dead Web site) whose URL is registered to ALPHA INFORMATICA E ASSESSORIA LTDA.

We watched a fair amount of the Senate floor debate, on TV Senado here in Brazil the other evening, on the extension of the CPMF “check tax.”

A more byzantine political issue could not be imagined.

The goverment lobbied hard to keep the tax going, arguing that it was needed as a precondition for tax reform because it is a tax that cannot be easily evaded.

Strong, reiterated talking point: “They are against this because this is the only tax that cannot be sonegado (evaded).”

Less dramatically put, it is a tax whose revenue stream is fairly predictable and reliable, which the government wanted in order to approach tax reform in an orderly manner that would hedge risk to its priority social and economic development programs.

The opposition employed classic Gingrichian “starve the beast” rhetoric. A Lusophone echo of the Reagan era, twenty years later. It takes me back to my misspent youth.”Trees are worse polluters than automobiles!” Remember that?

It was an extremely interesting debate in many ways — Neuza: “You watch C-SPAN a lot; do your lawmakers get this hysterical?”

Me: “They did not used to, but with the arrival of the likes of Catherine Harris of Florida, yes, it is trending in that direction.”

But in terms of clarifying an extremely complex issue, well, I still find myself not knowing what to think.

The government lost that vote, although, as my wife pointed out, watching the news the next day, the results were a bit confusing.

Because 45 Senators voted for the extension and 34 Senators voted against the extension.

Neuza’s first reaction, watching the news report: “They have that backwards, don’t they? The losing proposition should have fewer votes in favor, right?”

But the rule was that it had to be approved by a two-thirds majority, I guess. So, yes, in a certain sense, Neuza, Brazilian democracy, in this case, was based on minority rule.

Reiterated postmortem talking points: “This was a victory for tax evaders and money-launderers!” and “the Brazilian public health sector is in mourning.”

The Treasury minister said the loss of $40 billion in revenues should not affect the growth prospects or fiscal goals of the government.

But he also said that planned tax reductions for the productive sector would be cancelled.

The stock market fell 3% on the news.

The three Toucan governors of the powerhouse Southeastern states — São Paulo, Minas Gerais, and Rio Grande do Sul — reportedly clashed mightily with the leader of the Toucans in the Senate, Artur Virgílio of Amapá over the issue.

They wanted to do a deal in which the proceeds of the tax would be dedicated to health (Governor Serra here is a former federal health minister, and this is his pet issue. Even my Green-petista wife says very nice things about Serra’s initiatives on AIDS drugs during the Cardoso years. )

Nothing doing.

Those three states combined contribute about $R1 trillion to GDP, roughly and on the back of the envelope.

Amapá contributes about R$4 billion. In terms of per capita GDP, it ranks 26th out of 27 Brazilian states.
One effective talking point from the opposition (but I have not fact-checked it): The government, when it came to power had promised to maintain the CPMF — a tax on bank transactions — as a token tax, reducing the rate to a merely symbolic level, one that was principally to be used as a tool for monitoring money laundering.

Another:  If you pay another tax with a check, you pay a tax on the check you use to pay the tax. Which is not a happy thought.

Another: “This tax is passed on to the consumer, and when it is gone, prices will go down.” Hotly contested factoid, that.

I have no idea where to begin trying to form a coherent view of the issue — I guess I tend to the view that this was an act of political suicide by the DEM and PSDB — but I guess this cri de coeur from business journo Luis Nassif is a good enough place to start:

Não há grandeza, nem criatividade, nem projeto de país tanto no governo quanto na oposição . Fosse um pais racional, com grandeza, sairiam soluções criativas para o impasse da CPMF.

There is no greatness, or creativity, or a national project, not on the part of the government and not on the part of the opposition. If this were a rational nation, a nation with greatness, creative solutions would have been found to the impasse over the CPMF.

A oposição poderia arrancar do governo o compromisso formal de reduzir os encargos trabalhistas. Ou reduzir o PIS-Cofins. O governo apresentaria uma proposta formal de redução dos tributos no tempo.

The opposition could have extracted a formal promise from the government to streamline labor laws. Or reduce the PIS-Cofins tax. The government could have presented, in a timely manner, a formal proposal for reducing the tax burden.

Poderia ser fixada uma meta de desempenho dos gastos públicos, um teto para o aumento de receita, a aceleração da implantação do Estatuto da Micro Empresa.

A performance-based goal could have been set on public spending, a ceiling on revenue increses, an accelerated implementation of the Small Business Statute.

Nada ocorreu. O PSDB, oposição, cada vez mais se parece com o PT oposição.

Nothing happened. The PSDB, in opposition, looks more and more like the PT when it was in opposition.

The PT is often criticized for having opposed certain economic policies, like the Plano Real, then having adopted and adapted them.

The PT-based government now gets blasted from the leftward side for basically maintaining those policies when it got into office, and from the rightward side for “plagiarizing” the previous government’s policies, after opposing them just for the sake of opposing them.

On the leftward side, these are folks who want to end the independence of the Central Bank on monetary policy, as Uncle Hugo is doing, for example. An idea that makes me feel kind of queasy, but I am not enough of an advanced student of economics to explain why, exactly.

It is just that when you put politicians who are willing to believe the Second Law of Thermodynamics does not apply to them, if they find it inconvenient politically, in charge of important technical decision-making, you get the notion that the Iraq War will pay for itself and the Iraqis will great the American forces as liberators. For example.

Essa votação será emblemática por mostrar, pela primeira vez de forma nítida, algo que venho alertando desde as eleições passadas. No partido convive o futuro com o passado. O futuro são os governadores; o passado são os ex, aqueles sem perspectivas maiores no futuro. Entram aí desde ex-presidentes, como Fernando Henrique Cardoso, até parlamentares que só ganham alguma expressão quando se comportam como livres atiradores, como Arthur Virgílio.

This vote is emblematic, in that is shows us very clearly, for the first time, something I have been warning about since the last elections. In the PSDB, the future and the past live side by side. The future is represented by the governors; the past by ex-officeholders, and those without future political prospects. In the later category fall former presidents, like Cardoso, and lawmakers like Arthur Virgílio, who can only project themselves politically by playing the role of snipers.

Sarajevo snipers, if you want to spice up the analogy a bit.

O partido terá que resolver seus impasses antes das eleições. Se José Serra e Aécio Neves aguardarem o último ano para se posicionarem, o exército dos ectoplasmas, comandado por FHC, vai matar qualquer possibilidade de ressuscitar a sigla.

The party needs to resolve its impasses before the elections. If Serra and Aécio Neves wait until the last minute to take a position, the army of ectoplasms, commanded by Cardoso, are going to kill off any chance of a Toucan revival.

Army of ectoplasms?

Nassif does have something of a literary bent.

São verdadeiros vampiros da alma.

They are veritable soul-sucking vampires.

Vampires, it is said, cannot enter Brazil because of the power of the orixás. There are, however, lycanthropes (wolf-men) everywhere. According to folklore. Keeping arruda around the house is supposed to help with that, as well as with the dreaded mal olhar.

That was a knee-jerk post, written shortly after the vote. From a later column by Nassif, elaborating on this point:

Na outra ponta, estão os ex, ex-presidente como Fernando Henrique Cardoso, ou senadores de futuro político incerto, como esse truculento Arthur Virgílio. Eles só crescem em ambiente de guerra. A FHC interessa a guerra para ampliar seu espaço no PSDB e interessa que o governo Lula afunde, pois só assim – pelo efeito-comparação – poderia aspirar um julgamento mais benevolente da história para seu governo.

On the other side you have the “exes,” like ex-president Cardoso, or Senators with an uncertain political future, like the truculent Arthur Virgílio. Their stature is only increased in a climate of war. FHC has an interest in staying on a war footing because it increases his influence in the PSDB, and is interested in seeing the Lula government fail, because only thus — by the comparison effect — can he aspire to a more favorable judgment of history on his own government.

He is basically describing Pat Buchanan’s “wedge issue” strategy — which, like Confederate slave-owners after the Civil War, seems to have migrated to South America even as the political culture that originally produced it goes the way of the dinosaur. Or so one hopes.

Ao contrário de outros ex-presidentes, como Itamar Franco, José Sarney e Fernando Collor, FHC é um ex dotado de nenhuma grandeza, de nenhuma responsabilidade cívica.

Unlike other ex-presidents like Franco, Sarney and Collor, FHC is an “ex” lacking in greatness or civic responsibility.

“Clinton, after all, does not bash Bush,” you often hear here. When Jimmy Carter appeared to just that, people took off their hats and slapped him with them until he got back into line with the tradition, that ex-presidents do not trash sitting ones in public.

Serra e Aécio estão aguardando para se posicionar mais perto das eleições. Correm o risco de herdar um partido exangüe. Se a CPMF não for restaurada, cada problema do governo Lula, cada investimento que deixar de ser feito, cada piora nas áreas sociais terá responsáveis diretos: o PSDB, seus senadores e FHC.

Serra and Neves (the governors of the main southeastern states) are waiting to take a stand until the elections are closer. But they run the risk of inheriting a party that has been bled dry. If the CPMF is not restored, every problem the Lula government has, every investment that does not get made, every step backwards in the social area, will have direct culprits: The PSDB, its Senators, and Cardoso.

Havia receio de que a aprovação da CPMF pavimentasse o sucesso do governo Lula. Agora, qualquer fracasso terá um responsável direto: a oposição.

There was a fear that approval of the CPMF might pave the way for the Lula government to succeed. Now, if it fails, the failure will have a single culprit: The opposition.

As I said, a fairly uncharacteristic anguished cry of outrage from the “spreadsheet geek” Nassif.

But I guess I have sort of the same reaction.

The PSDB has an internal power struggle going on, among other things, on whether to continue to collaborate with the DEM (ex-PFL). A lot of which depends on a bet on whether the political machinery of Carlismo can still deliver the vote in those innovative ways it developed of doing so (“Vote Quimby or my friend here will shoot you.”)

That coalition got plastered in the last election — by pretty much the same margin as Serra was defeated in 2002 — and yet the campaign manager for that failed campaign was recently elected party president.

Interviewed on Roda Viva (sort of a Tupi Meet the Press, with a set designed by the production designer of the 1960s Batman series) recently, the gentleman, former Socialist Sérgio Guerra of Pernambuco, impressed me as suffering from the lack of a coherent message.

The party seems to have resolved to stick to the same old schtick, which includes blasting its adversaries with massive doses of argumentum ad Nazium and conspiracism along the lines of

There is an organic link between the ParTy of the 40 gangsters, the agro-terrorist MST, the narco-terrorist FARC, the MIR and the kidnap-terrorist PPMR and the narco-retailing PCC, which now doubles as its armed wing, outsourcing terrorism in the service of its ideology. Tribuna Nacional (Brazil), July 17, 2006 (from Google cache)

See also

It was a bit startling to see the assembled press really grilling the guy on that point, too. (Notable substitution on the board of inquisitors: Leandro Fortes of CartaCapital, in for Márcio Aith of Veja.)

It reminds me of those people who still go around saying that Howard Dean, president of the Democratic Party, is the genius who “discovered the power of the Internet in politics.”

Howard Dean presided over a campaign that failed to unseat Bush, in large measure because its message was effectively lambasted as incoherent.

People running around with giant beach sandals chanting “flip flop! flip flop!”

(Note to Brazilian readers: “flip-flop” is a popular term for havaianas, and also connotes indecisiveness and irresolution. The knock on Sen. Kerry was that he gabbled incoherently. Not always a fair knock, but it is undeniable that he failed to counteract this knock effectively.)

Howard Dean still presides over the party.

This seems an awful lot like rewarding failure.

Creepiest moment of the part of the debate we saw before getting a throbbing migraine and switching over to a wonderful, wonderful concert with Carlos Lyra in front of a symphony orchestra (winding up the set with the great “Influência do Jazz”): The floor speech by Antônio Carlos Magalhães Junior. See

I will try to see if I can find some local commentary on the issue that does not resort to gabbling logic-chopping.

We were going to watch Miriam Leitão’s panel on the subject last night on GloboNews, but we had a few glasses of wine and then Neuza and I started playing guitar together. (I can now play Baden-Powell’s “Consolação” pretty well. I am practicing up on “Desafinado” for the family BBQ on Sunday.)

Miriam Leitão, whose byline appeared on this astonishing piece of misinformation recently:

Chávez lost the referendum.

Ecce Globo.

The Estado de S. Paulo‘s principal editorial can sometimes be a decent source of reality-based conservative opinion, and its business pages are often pretty okay, too. Worth reading after a good boil, at any rate. I should look at the Gazeta Mercantil and Valor Econômico as well. Veja is useful so long as you approach it with the assumption that the opposite of what it says is likely to be true. See

Same goes for (the abysmal) IstoÉ Dinheiro and Época Negócios.

I will see if I can put together a decent opinion roundup from responsible adults who agree to disagree.

Time permitting. I have a travel-guide writing gig lined up, believe it or not.

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