Tax evasion in Brazil reached up to US$110 billion in 2020, says study

RIO DE JANEIRO, BRAZIL – Tax evasion in Brazil was between R$460 billion and R$600 (US$110) billion in 2020, according to a study released on Wednesday, 10, by the Retail Development Institute, IDV, with the support of consultancy firm McKinsey & Company and law firm Mattos Filho.

Called Study on Informality in Retail, the material with data from 2020 was the fourth conducted by McKinsey and the third in partnership with IDV – the previous studies were in 2004, 2014, and 2019.

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Almost 80% of the tax evasion recorded last year was derived from companies not collecting taxes on sales of products and services.

The remainder was derived from tax evasion related to payroll employment.

In 2020, according to the study, retailers contributed between 95 billion and 125 billion reais to the evasion of foreign exchange.

In good measure, behind the numbers, there are two issues. The first is the high informality of the sector. Retail is the sector that concentrates the most significant amount of unregistered workers, a contingent of 6.8 million people.

In addition, the advance of e-commerce has presented extra challenges to the fight against informality.

Digital retail presents a higher tax evasion than physical retail, from 33% to 37% of sales against 25% to 34% of physical sales, according to data from the study.

This is because digital platforms have different levels of monitoring of their sellers’ informal activities.

The expansion of cross-border sales (commercial operations that go beyond borders) and delivery services highlight new routes of informality.

INFORMALITY IN BRAZIL

The Brazilian GDP growth has been based on the expansion of the workforce. Still, with the end of the demographic bonus, the country will depend on higher productivity to continue growing, as other developing countries have done, such as China and India.

Informality, characterized by unregistered work or tax evasion, is one of the main inhibitors of productivity.

Brazil made great strides in reducing informality between 2002 and 2012. In this period, the rate of unregistered occupants fell by 15 percentage points, and the informality index of the economy fell by about ten percentage points. Still, both advances against informality and economic growth have stagnated in the last decade.

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