Tuesday, July 07, 2009

Sarkozy and Lula: Alliance for Change

Nicolas Sarkozy and Luis Inácio Lula da Silva, presidents of France and Brazil respectively, have published an editorial in the New York Times ahead of the G8 summit meeting in Italy (in which the Italian hosts may have rather let themselves down) entitled Alliance for Change.

The two presidents argue, stating the rather obvious, that

"The need to reform global governance did not spring from the crisis. Well before its outbreak, the multilateral system was conspicuously unrepresentative and lacking in coherence. The ability of international institutions to respond to the serious challenges of today’s world needs to be reinforced and their mandates reviewed."

And they add, quite correctly:

"The decisions taken by the G-20 to improve the regulation and oversight of international finance, to curb speculation, to crack down on tax havens and money laundering centers, and to foster growth must be implemented."

The pressure is, quite correctly, being maintained.


Anonymous Anonymous said...

President Lula and the Tax Havens

"Our proposals include the end of tax havens. They represent the key ally of international organized crime, drug trafficking, corruption and terrorism. It is not possible to effectively fight these evil manifestations, without attacking the financial rear that never failed them.", said president Luiz Inácio Lula da Silva at a recent event sponsored by "Valor Econômico" and "The Wall Street Journal".

In the last summit of the G20, group of the 20 largest economies in the world, president Lula's main proposal was the extinction of tax havens. Thus, to materialize the will of the president, domestically, we must simply amend the Normative Instruction RFB Nº 748 of June 28, 2007, issued by the Brazilian Internal Revenue Service, which governs the obligatory registration in the Cadastro Nacional da Pessoa Jurídica (CNPJ) of companies domiciled abroad.

Unlike Brazilian companies, that must identify all members and administrators, there is the secrecy sponsored by the Brazilian state on the composition of companies domiciled abroad. In fact, Article 15 of the Normative Instruction RFB Nº 748 enshrines a derogation for non-submission of names of members and administrators from companies domiciled abroad. Hence, they obtain the obligatory registration in the CNPJ and start doing business in Brazil without identifying its members and administrators. All they need is an assignee, often just a puppet without any professional or commercial relationship with the company domiciled abroad.

Worse: currently it is only required from companies domiciled abroad a document equivalent to their constitutive certificate. It means a simple declaration issued by a public entity of a tax haven with the company name, date of its opening, legal nature, company objective and an address. This document is unable to identify directors and individual members. Then, the Brazilian Board of Control of Financial Activities (COAF) requests information for the same public entity of a tax haven, almost always, with no answer.
The general principles of economic activity under Article 170 of the Brazilian Constitution, notably those regarding national sovereignty and free competition, are flagrantly violated by the secrecy opportunity given to companies domiciled abroad. National sovereignty is violated when secrecy prevents the identification of the authors of crimes committed under the cloak of "ghost" companies created in well-known tax havens. Beside, free competition is wiped out when tax evasion is hidden by anonymity and the liability of partners and administrators over the collection of taxes becomes impossible.
...our own administrative permissiveness regarding CNPJ enrollment that enables offshore companies from notorious tax havens to act freely in Brazil.

In conclusion, it is necessary to amend the Normative Instruction RFB Nº 748, to require the identification of individual members and administrators, as well as the deposit of all certificates of incorporation and by-laws from companies domiciled abroad. Subject to the declaration of inability to obtain new registration in the CNPJ and for the adjustment of existing entries. Similarly, a complete scan in all other non-statutory acts on the subject is necessary. Therefore, it is imperative not to waste president Lula's leadership and word, subdued by inertia in the making of our own homework with clear damages for Brazil's role in the building a new economic world order without tax havens.

Heráclio Mendes de Camargo Neto and Filemon Rose de Oliveira are Attorneys for the National Treasury in Brazil.


8:10 am  

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