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Wealth Tax | Marinho Clan Takes a Stand

Screenshot from 2015-01-03 15:17:57

Diário do Centro do Mundo reproduces the editorial in O Globo today, warning in strong terms of  a proposed wealth tax that would affect mainly people with Marinho in their names. Let me excerpt the op-ed in English and then sample some reactions from the blogs, both dirty and clean.

The taxing of great fortunes is ever an object of desire for elected officials in search of what seems like easy money. [They enjoy] the advantage of having the power to present the new tax as an act of “social justice” – always a popular banner, and always useful for covering up any and all political and economic aberrations.

The familiar catechism of paleolithic anti-communism is the central subtext here. I sense the poison pen of Ali Kamel at work.

The history of this tax began in the XIXth Century, devised by the English socialists. It fell into disuse over the decades, as socialism collapsed, but returned to the headlines recently thanks to the best-seller “Capital in the Twenty-First Century,” by Thomas Piketty

Based on a wide-ranging compilation of statistics from various nations, Piketty sets out to prove that the capital gains from inheritance and private property exceed, as they inevitably will, the income earned by labor. Given this argument, Piketty proposes a tax to reduce social inequalities all over the world.

These sorts of ideas are always tempting. That is why, taking into consideration the ideological climate of the 1987 Constitutional Convention, the Brazilian constitution, in force as of 1988, includes this tax in two Articles. It was never regulated. Still a senator, Fernando Henrique Cardoso presented a bill on this subject, and that was all. During the last decade, a decade of the left-wing Workers Party in power, it has had plenty of chances for ensuring these Articles are applied. Among the PT’s membership, there was one such proposal, which failed. It seems as though the Presidency and its allies are so heterogeneous that they cannot obtain a quorum for enforcing this tax.

The real issue in this debate, however, is the question of the wealth tax as “an illusion.” A principal concern is the high cost of collecting this tax. Because it is a declaratory obligation — it is calculated based on what the taxpayer discloses – income from this tax tends to small amounts, because of the predictable undervaluation of the assets to be taxed. For that reason, it is vital that an oversight mechanism be built to combat tax evasion. At the end of the day, however, the conclusion is always that the cost of these measures does not compensate for the lost revenue. We all know that a number of countries have done away with this tax, including the U.K.

Another problem: As soon as a real threat arises of having to pay a wealth tax, the family dynasties in question will transfer some or all of their assets to countries without a wealth tax, and its wealth will yield dividends only in offshore jurisdictions. The proposed tax is a real bullet in the foot, a terrible deal. There are also significant risks that justice will miscarry: when heirs to real property lack the money to pay the taxes. The wealth tax is one of those inventions that seem simple enough, but are far more simple than they look.

The endpoint of this line of reasoning is another simple, but unstated, fact: Globo, family-owned, would suffer most of all from a wealth tax, and past troubles with the taxman could come back to haunt it.

Imprimatur

Lobbyists for the soap-opera zaibatsu apparently have a staunch defender in a strong candidate for the president of the lower house of the legislature, a sort of tropical Pat Robertson: Eduardo Cunha (PMDB-RJ), who has made his position clear.

Source: Congresso em Foco

Leader of the PMDB and candidate for Speaker of the House, Eduardo Cunha (RJ) stated that his party opposes and will not even accept “discussing the matter” of the economic regulation of the media. The declaration, published with Twitter, came in response to an announcement made yesterday by Communications Minister Ricardo Berzoini, that the ministry would continue to work on a plan for the sector.

“It is important to open up a fraternal, transparent debate by the Brazilian people, in which its business and industry associations, its labor federations and partnerships, can carry on a deep, democratic debate on what communications in general mean to Brazil, and especially the communications groups that exploit public concessions,” Berzoini said yesterday.

cunha_capa

In a radio interview with Jovem Pan — Globo radio network —  Cunha tones down the rhetoric: “The solution for a bad press is more press.”

Screenshot from 2015-01-03 17:16:20

This is a bit like saying the solution for a monopoly is a duopoly, loosely joined. Take the case of Televisa in Mexico …

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