Today, the lower chamber of the Brazilian Congress is voting on the possibility of renewal for four more years of the tax on financial transactions (CPMF – Contribuicao Provisoria sobre Movimentacao Financeira). As always, there are those against and those in favor of the renewal. But such groups are quite unbalanced. There are only two sectors in the Brazilian economy which have great interest in the renewal of the tax: the banking sector and the government.
The CPMF is a considerable grain of sand in the engine of banks competition, it hinders clients the possibility of biding banks for higher rates and lower fees. But even if the elimination of the CPMF could increase the competition among banks, and in theory, reduce their profits, the banking sector in Brazil is healthy and wealthy enough to cope with such marginal challenge. The main problem is our public sector, a corrupted and inefficient giant with no interest in eliminating this hundred percent inefficient tax.
These days I read someone arguing that the CPMF was a progressive tax because the rich people are the ones who do more financial transactions. He definitely did not understand the damage that such a tax causes along the economic activity. The government does not have even one plausible alibi in favor of the CPMF. The most innocent one proclaims that this tax has the function of fiscal supervision, as it is able to define the transaction level during a certain period. But if the banking system already has the tax basis there is no need to have a positive rate on it to measure the amount transacted. That’s obvious!
The CPMF is a tax which testifies against the intelligence of Brazilian society. According to specialists the lower chamber has “already” decided for the renewal of the tax, and, unfortunately, it will be very difficult for members of the opposition in the Senate to have enough strength and willingness to vote against it. Another great shame for all of us, Brazilians!