RIO DE JANEIRO, BRAZIL – Technology giants like Amazon, Google, and Facebook pay up to 75% less tax on net income in Brazil than other companies of the same size, according to a report by Federal Deputy João Maia (PL-RN) based on data from the Internal Revenue Service.
This would happen, according to the report, because these companies operate in a country where they have no physical presence, which would allow the profits to be shifted to other jurisdictions and reduce the equivalent amount to be taxed. In response, the companies denied any benefits.
In an interview with R7, Deputy João Maia explained that the project does not seek to harm the consumer with more taxes, but to end what he considers a “tax injustice” to ensure fair competition. “This movement of taxing global internet companies to compensate for their practices of reallocating revenues and profits in countries where they are taxed is worldwide,” he explained.
The survey, prepared to justify a bill by the congressman that would increase taxation on the sector, gathered data from the IRS of companies with annual global revenues over R$3 billion without detailing the amount paid by each one (which is prohibited by law).
For this reason, the deputy’s office requested data from the Ministry of Economy about the average percentage of taxation on profits in Brazil and the amounts sent abroad by these internet giants. To compare, it also asked for the percentage of taxes paid by companies in other sectors of the economy on their profits.
With the data, the team arrived at 11 companies and separated the digital giants from those from other sectors based on their CNAE (National Classification of Economic Activities), a Revenue Service code to identify the economic activities of the companies.
The figures revealed that while big techs pay corporate income tax (IRPJ) and social contribution on net profit (CSLL) rates equivalent to 4.44% of their net income, the figure is 19.15% for companies of the same size in other sectors.
“This points in the direction that global internet companies that make more than R$3 billion annually in Brazil pay on average about 25% of the taxes on net profit of companies in other sectors,” the authors wrote.
The report acknowledges that these companies pay taxes in the same way when sending profits to other jurisdictions, but added that these amounts are often calculated from the IRPJ and CSLL tax base, which would keep taxation lower.
“On the one hand, it is true that there is an additional taxation on remittances in favor of Brazil; but, on the other hand, this does not mean that this incidence corresponds to a worsening of the situation of these companies, since it is possible that the total income tax collection would be higher if these remittances did not exist,” justified in the report.
As a solution, the deputy cited the bill itself (2358/2020) that creates a tax to be levied only on multinational technology companies with global revenues greater than R$3 billion, without charging companies with this profile that operate in Brazil (since they could not shift profits).
According to the bill, in order to guarantee this taxation, a tax of 1% to 5% of gross sales would be applied, and these resources would be destined to a fund to finance scientific and technological development in the country.
The other side
Questioned, the big technology companies said they pay the same equivalent amount of taxes. “Facebook is among the largest taxpayers in Brazil and collects the same federal taxes as other companies in the service sector, including the same rates and bases of calculation,” Facebook said in a statement.
Google also spoke out to reaffirm its respect for tax legislation. “We operate in accordance with all local tax laws and regularly pay all taxes owed by technology companies in Brazil, at the federal, state and municipal levels.
Sought by R7, the Federal Revenue Service did not comment. Amazon did not respond to questioning until the publication of this story.
Source: R7