Brazilian Taxes Hinder Small and Medium-sized Businesses, According to Entrepreneurs

RIO DE JANEIRO, BRAZIL – Entrepreneurs in the commerce, industry, and services sectors are assessed in a quarterly survey conducted by INSPER’s Center for Business Studies, with the support of Santander.

Taxes were mentioned as the greatest obstacle to business progress in the opinion of 47.7 percent of entrepreneurs. Interest rates ranked second with 20.6 percent. After that, there was default (14.9 percent), labor costs (14.2 percent) and the exchange rate (2.6 percent).

“The fiscal problem is represented in its two dimensions for entrepreneurs of small and medium-sized companies. On the one hand, they believe that the approval of the Social Welfare reform will have a positive impact on their business”.

“And, on the other hand, they point out the tax burden as the greatest macroeconomic obstacle to the development of their business,” says Gino Olivares, a professor at INSPER and the researcher in charge of the Small and Medium Business Confidence Index (IC-PMN).

In his opinion, “both aspects point to the convenience of solving the structural problems of Brazilian public finances.”

“In addition, respondents are still very reluctant to consider business opportunities abroad. The answers point to the need to offer companies more information and support on the alternative of looking at the international market”, adds Olivares. “Last but not least, the entrepreneurs interviewed showed an expectation of sales in the fourth quarter higher than last year’s”.

Welfare Reform

For 26.6 percent of respondents interviewed weeks before the text was passed in Congress, the bill would have little impact on business. Another 17.6 percent believed it would produce a significant impact and, in the opinion of 19.9 percent, there would be none. The reform was viewed as irrelevant by 13.9 percent. Of the total, 22 percent had no opinion or did not know how to answer.

Turnover

Regarding turnover, more than half reported expecting growth in this last quarter compared to the same period last year. Some 41.2 percent expect a slight increase and some 16 percent expect a strong increase. For 22 percent, the result will be the same. As for 15,3 percent, there is the potential of a slight decrease and of a strong decrease for 5,5 percent.

Investments abroad

In terms of the external scenario, despite trade conflicts between countries, 25.4 percent considered it feasible to invest in opportunities outside Brazil. Conversely, 19.7 percent regarded this as an unfeasible move because it was too risky. Most, however, would consider the matter (55 percent).

The data were obtained through telephone interviews with 1,287 small and medium-sized entrepreneurs, from September 16th to 20th this year. The margin of error is three percent plus or minus, with a confidence level of 95 percent.