Personal Opinions

The traditional way of bearing public services costs occurs through the collection of taxes in money, in Brazil as well as in the rest of the world. However, it is not and does not need to be the only and almost exclusive way of taxation.

Obviously, the collection of taxes in money is convenient and simple. It is particularly suitable for the collection network and for the State, which happens to have the most convertible asset in any possible currency market. But that convenience brings some drawbacks that are not usually evaluated.

First, we must consider that the collection process is costly. So is the process of applying public funds. Therefore, the value of tax tends to be consumed in the complexities that underlie at the starting and ending points of the process, i.e., between the amount paid by the taxpayer and the value received by society in public services.

If the collection costs in the world are around 1% of the collected gross value, most likely the application structure and the provision of public services should consume a much more significant part. That part which is not spent on the organization of health, education, transport, security services and the almost infinite variety of existing public services today.

The state aims at satisfying the interests of society, collecting taxes from some and providing public services to others – or to those taxpayers themselves. The State has a relevant role as the organizer of individuals in the context of a complex society; therefore, in general, its role is of an intermediary.

Every intermediation has some benefits and it also has disadvantages. For example, economics and common sense teaches us that, when the weight of commercial intermediation is excessive, there are costs to both producers and consumers. This practice not so transparent also occurs in the cost (taxation) and application of public funds.

Therefore, if all social needs are met by the “state intermediation”, it may be overloaded. And if everything goes through the intermediary, the direct relationship between those who need and those who can satisfy social needs is unsustainable. The maximization of this process, as with taxation in all countries, tends to generate inefficiencies that affect society, since the needs are unlimited, while the resources to satisfy them are limited.

Therefore, the development of tax disintermediation mechanisms is proposed. In simple words, it is suggested that new and different ways of “payment” of taxes be developed. As an example, a possibility may be the use of current tax compliance via the direct provision of public services by taxpayers.

The term “payment” must be understood in its broadest sense, which represent various forms of partial or total compliance with tax obligations, but would not include accessory obligations. So, for instance someone working during weekends in a nursing home could get an income tax credit for this work. In another example, a neighbor might monitor a public square and get a compensatory credit for his IPTU (property tax) obligation.

Although that idea makes taxation more complex and sophisticated, it represents an opportunity for rich countries and poor countries, since in both cases there are no enough financial resources for the execution of works or the provision of public services. For rich countries, there is the possibility of returning to productivity countless unemployed capable people. For poor countries, the possibility of execution of works and services, without the need for financial disbursements, and with a significant increase in quality of life. Moreover, the advantages of this proposal work for all types of countries, including those that are not on these extremes.

Another significant advantage is the transparency and the materialization of the effects resulting from the payment of taxes. Taxpayers will be pleased to know that the results of their efforts bear no costs losses through state intermediation, or possible corruption when applying resources. Thus, the volume and quality of taxes that finances state activities are increased.

Although the purpose of this document is not to detail the possible procedures to implement this idea, there is possibility for the application of various types of taxes, particularly those that impact income and property.

Therefore, in order to progress in the provision of public services, there is a need to project new ways of funding public interests. This is a proposal.

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