72
ESS-33
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.
5.8. Lessons learnt
Lesson 1
Innovation aimed at expanding fiscal space through increases in contributions can generate very significant returns
. Brazils innovations comprise both fiscal instruments and social policy. From the standpoint of the social protection system, the most important
innovations include: the introduction of the rural pension scheme; the use of taxes on financial transactions to generate funding from the formal economy, mainly to support the
extension of social protection; improvements in the administrative and institutional framework of the collection system; measures to facilitate and increase tax coverage and
social protection coverage in micro and small enterprises.
Lesson 2
Efficiency of social expenditure management does matter
. It is possible to create fiscal space through the review of programmes and of institutional and administrative
mechanisms. Reforms in the organization of social transfer programmes, in terms both of their structure and of the tools and criteria for the allocation of resources to generate some
selectivity and progressive incentives such as the renovation of educational programmes and the Bolsa Família, can be an effective means of creating fiscal space. In Brazil these
reforms were very important for extending the coverage of the universal health scheme and, at the same time, ensuring more effective social investment. The Brazilian
experiences in integrated universal health care, in its education system indicators and in its social assistance coverage, are significant in terms of their impact on poverty reduction and
capital accumulation.
Lesson 3
Fiscal and macroeconomic discipline does matter.
Brazil has been able to achieve a great degree of macroeconomic stability, which relies heavily on the effect of social
programmes on the demand for domestic consumption. However, these achievements are to a very large extent attributable to the Governments responsible management of its
monetary and fiscal affairs. The management of the countrys external debt and of the external sector of the economy has been a key element in the creation of fiscal space
– so
much so that the Brazilian economy has become a foreign creditor.
Lesson 4
Social protection can leverage the formalization of the economy while at the same time generating fiscal space for growth
. The classic idea that social security contributions generate distortions in the labour market and increase informality is not
borne out by the experience of Brazil. In Brazil much of the increase in state revenues is attributable to increases in social security contributions, which explains the remarkable
expansion observed in contributory social insurance coverage in recent years. More specifically, the strong positive development of social security registration rates is a clear
reflection of a process of labour formalization. Of course, this mechanism does not operate alone; it requires instrumental and administrative reforms as well, to encourage and even
oblige enterprises to adhere to the social insurance scheme while at the same time making it easier for them to do so. In terms of growth and macroeconomic stabilization, the overall
ESS-33
73
gains from direct investment in social protection appear to be very considerable in Brazils experience
– much greater than simple quantitative models seem able to explain. The gains are notable in terms of human capital, productivity, a stronger sense of citizenship, social
cohesion, political stability and a good investment environment, inter alia.
