BRAZIL - COMMERCE AND STREET VENDORS STOP ACCEPTING PIX AND CREDIT CARDS

THE GROWING DECISION BY SMALL BUSINESSES, STREET VENDORS, AND SERVICE PROVIDERS TO STOP ACCEPTING PIX AND CARD PAYMENTS AND RETURN TO CASH IS NOT RANDOM OR IDEOLOGICAL. IT IS A RATIONAL ECONOMIC RESPONSE TO A RISING PERCEPTION OF RISK CREATED BY THE EXPANSION OF FINANCIAL SURVEILLANCE UNDER THE LULA GOVERNMENT.

OFFICIALLY, THE GOVERNMENT STATES THAT THERE IS NO TAX ON PIX. TAKEN LITERALLY, THIS STATEMENT IS TRUE. THE CORE ISSUE, HOWEVER, IS NOT THE EXISTENCE OF A TAX TODAY, BUT THE CHANGE IN THE INSTITUTIONAL ENVIRONMENT. THE GOVERNMENT ITSELF HAS CONFIRMED THAT IT WILL INCREASE THE MONITORING, TRACKING, AND CROSS CHECKING OF FINANCIAL TRANSACTIONS, WITH INFORMATION ABOUT SO CALLED HIGH VALUE MOVEMENTS BEING SHARED WITH THE TAX AUTHORITY.

IN PRACTICE, THIS SHIFTS THE RELATIONSHIP BETWEEN THE STATE AND SMALL ECONOMIC AGENTS. FOR LARGE COMPANIES, WITH FORMAL ACCOUNTING STRUCTURES, LEGAL TEAMS, AND TAX PLANNING, THIS MONITORING IS SIMPLY PART OF THE COST OF DOING BUSINESS. FOR SMALL SHOPS, STREET VENDORS, AND INFORMAL OR SEMI FORMAL SERVICE PROVIDERS, IT REPRESENTS A REAL RISK OF AUDITS, FINES, RETROACTIVE ASSESSMENTS, AND FUTURE TAX CLAIMS.

THE FEAR IS NOT ABOUT A TAX TODAY, BUT ABOUT WHAT COMES NEXT. THE BRAZILIAN TAXPAYER HAS LEARNED FROM EXPERIENCE THAT SURVEILLANCE OFTEN COMES BEFORE TAXATION. FIRST, MONITORING IS PRESENTED AS TECHNICAL, NEUTRAL, AND NECESSARY. LATER, THE DATA BECOMES A TOOL TO EXPAND TAX COLLECTION, CREATE NEW OBLIGATIONS, AND JUSTIFY PENALTIES.

FACED WITH THIS UNCERTAINTY, SMALL BUSINESSES REACT DEFENSIVELY. BY REDUCING DIGITAL PAYMENTS AND OPERATING WITH CASH, THEY SEEK TO LIMIT THEIR FINANCIAL FOOTPRINT, BUY TIME, AND PROTECT THEMSELVES FROM A TAX SYSTEM THAT IS ALREADY COMPLEX, COSTLY, AND PUNITIVE. THIS IS NOT NECESSARILY ABOUT EVADING TAXES, BUT ABOUT SURVIVAL IN AN UNSTABLE REGULATORY ENVIRONMENT.

THE COLLATERAL DAMAGE IS SIGNIFICANT. PIX AND ELECTRONIC PAYMENTS REPRESENTED A MAJOR STEP FORWARD IN FINANCIAL INCLUSION, LOWER TRANSACTION COSTS, AND OPERATIONAL EFFICIENCY FOR SMALL BUSINESSES. BY GENERATING FEAR AND DISTRUST, THE STATE ENCOURAGES A TECHNOLOGICAL BACKSTEP, INCREASES THE USE OF CASH, AND UNDERMINES THE VERY TRANSPARENCY IT CLAIMS TO PROMOTE.

IN THEORY, THE POLICY GOAL IS TO FIGHT TAX EVASION. IN PRACTICE, THE FIRST TO FEEL THE IMPACT ARE THE MOST VULNERABLE, THOSE WHO LACK THE TOOLS AND STRUCTURE TO QUICKLY ADAPT TO FISCAL DEMANDS. LARGE ECONOMIC PLAYERS ABSORB THE COSTS. SMALL BUSINESSES DEFEND THEMSELVES AS THEY CAN.

THE END RESULT IS PARADOXICAL. IN THE ATTEMPT TO COLLECT MORE AND CONTROL MORE, THE GOVERNMENT CREATES UNCERTAINTY, DISCOURAGES FORMALIZATION, AND PUSHES PART OF THE ECONOMY BACK TOWARD INFORMALITY. THE QUESTION THAT REMAINS IS SIMPLE AND LEGITIMATE. IF PIX WILL NOT BE TAXED, WHY THE SUDDEN URGENCY TO INTENSIFY SURVEILLANCE PRECISELY OVER THOSE WHO CAN LEAST AFFORD THE WEIGHT OF THE STATE.