Friday, May 15, 2009

Regulatory Environment

The Brazilian Government is committed to protecting human rights; the first National Plan for Human Rights was unveiled in 1996. Principle human rights concerns include police violence and impunity, poor prison conditions, access to legal advice, violence and discrimination against indigenous communities and landless people, human trafficking, major deficiencies in the realization of children’s rights, tortures, working conditions, and corruption with relative impunity for those involved.

Voting is mandatory for all literate citizens ages 18-70. Voting is optional for illiterate citizens and for citizens ages 16-17 and over 70.

The labour market is characterized by well-developed regulations and Brazil has a system of labour courts where routine cases such as unfair dismissal, working conditions, salary disputes and other grievances are resolved, yet the labour market has a high rate of informal sector employment. As much as 40% of all workers are not formally registered, pay no income tax, and do not enjoy full protection under the labour code.

The overall freedom to start, operate, and close a business is limited by Brazil's regulatory environment. Starting a business takes about four times the world average of 38 days, and obtaining a business license takes more than the global average of 225 days. Closing a business is difficult.

Companies operating in Brazil have to deal with a wide range of regulatory agencies due to the federal structure of the political system. Public officials enjoy broad discretionary authority and the central government has historically exercised considerable control over private companies by upholding extensive and frequently changing regulations. According to a 2008 CMI report, the majority of responding companies found entry into Brazilian markets difficult and expensive, but promising if things were done right.

Brazil's top income tax rate is 27.5 percent. The standard corporate tax rate is 15 percent, but a surtax of 10 percent and a 9 percent social contribution on net profit paid by most industries bring the effective rate to 34 percent. In December 2007, the legislature vetoed a bill that would have renewed the financial transactions tax. In the most recent year, overall tax revenue as a percentage of GDP was 38.8 percent.

Tax regulations are mentioned as the single most problematic factor for doing business in Brazil, followed by inadequate supply of infrastructure and tax rates. Corruption is also ranked as a significant obstacle for doing business. The World Bank & IFC Enterprise Survey 2003 reveals that senior managers spend 7% of their time dealing with government regulations and that only 34% of companies agree that public officials interpret regulations consistently and predictably.

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