Gross tax burden: The role of social contributions
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iii the increased productivity of labour resulting from improved training of the workforce, generated in turn by an increase in school attendance. The sum of these effects should be
reflected in the medium and long term, perhaps over a time horizon of 15 years or so, by an increase in the aggregate income of households and, therefore, by an expansion of
domestic demand for consumption and investment.
While the repercussions of better health and education on families income levels have been extensively studied, their ultimate impact on economic growth has not. This is of
course a highly complex quantitative issue, mainly because of the interrelationships between the variables concerned, which quantitative models are not able to capture with
any degree of accuracy.
Studies by Pochmann 2007, Lavinas 2007 and Soares et al 2006, together with data from household surveys conducted in 2004 and 2006, show that Brazils socioeconomic
indicators improved and that progress was made in reducing absolute poverty and inequalities in income distribution. According to ECLAC the poverty rate in Brazil fell
from 38 per cent of the population in 2002 to 28 per cent in 2007 UNDP, 2008.
According to Paes de Sousa 2010, 19.4 million Brazilians have overcome extreme poverty in the last decade and in 2008 the extreme poverty rate was one-third that of 2001.
The same report shows that Brazil was able to reach one of the MDGs a decade before the scheduled date and has established stricter targets for poverty reduction. In terms of
reducing inequality between 2001 and 2008, 10 per cent of the low-income population increased their income by six times more than did the 10 per cent of those earning the
highest incomes IPC-IG, 2008.
The quality of social spending, in terms of its efficiency and effectiveness, is critical for creating fiscal space, and it serves as a useful criterion for analysing fiscal policy in Brazil
over the two decades since the 1988 Constitution. The impact of social spending has been very noticeable in areas that are critical for the sustainability of economic growth. Besides
the improvements in the countrys poverty indicators already referred to, there has been an increase in the coverage and performance of the educational system. The illiteracy rate
among Brazilians aged between 15 to 17 years decreased from 8.2 per cent in 1992 to 1.7 per cent in 2007, and the average years of schooling for people aged 15 years and over
increased from 5.2 to 7.3 years from 2.6 to 4.5 years in rural areas during the same period. Between 2000 and 2008 the size of the population benefiting from social insurance
grew by 9 percentage points, a clear indication that workers are moving from the informal to the formal sector of the economy. Benefits paid under the social assistance system were
extended to almost 50 million people, from an initial base of 2 million in 2000. However, despite the strong health system restructuring process experienced by the sector including
the strengthening of health promotion and prevention programme
s, as in the “Saúde da Família
” Programme and the universalization of health access through the SUS, private expenditure on health is still considerably high in Brazil. Some of the more recent
measures adopted by the Government in response to the economic crisis which are expected to have a medium- to long-term social impact include substantial increases in the
Continuous Cash Benefit Programme Benefício de Prestação Continuada, the maintenance of the investment schedule under the Growth Acceleration Programme
Programa de Aceleração do Crescimento, which is seen as playing a key role in the creation of jobs in the formal sector, and the pursuit of social infrastructure projects in
rural areas power supply, housing and sanitation that are recognized sources of growth for the economy.
In conclusion, fiscal intervention supported by a significant increase in state funding seems so far to have been altogether compatible with Brazils goals of economic growth and
development. Brazil is certainly one of the few countries in Latin America, and perhaps in the developing world, whose experience in increasing the tax burden has been successful,
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and this has undoubtedly played a key role in supporting the countrys economic growth policies and in financing social security and social spending. However, while Brazils
macroeconomic indicators over the last decade speak well of the responsible management of the tax issue, this is no reason to disregard opportunities to revise the tax system, as has
been suggested by various experts and institutions.