Tag Archives: tax

Brazil: I’ll do it tomorrow if that’s OK?

Business Daily on the BBC World Service today was focused on the possible decision by FIFA to cancel the World Cup games in Curitiba because the stadium is not ready. The BBC is being cautious and waiting for the actual announcement from FIFA, but ESPN has already started reporting that FIFA has taken this decision and Curitiba is officially out of the World Cup.

Of course this would be a disaster for Curitiba. It’s a fantastic city that is clean, safe, and has buses that people actually use. A complete contrast from the edginess of São Paulo or the favelas dotted all over Rio. It’s the last place that you might expect to fail when Brazil has also been building new stadiums in places like Manaus and Cuiabá.

But what I found irksome when listening to the BBC coverage was the vox pops they used when characterising Brazil. There was a university professor who talked about the culture in Brazil that everything can be done tomorrow. There was the miserable commuter who spends hours travelling to and from work each day – on a good day. There was the small business owner who said how terribly difficult it is to do business in Brazil.

The coverage wasn’t balanced or fair. I have complained a fair few times about the challenges of living in Brazil, notably things like the bureaucracy associated with buying an insurance policy or registering a car. Simple transactions that should really be easier, but on balance I actually like it here. It sounds irritating to hear the BBC doing a cultural hatchet job on how all Brazilians are lazy, feckless, and would rather not do anything today because there is always tomorrow.

I run a business in Brazil. If a contractor delivers anything late then I don’t pay them. If they let me down more than once I will never work with them again. If they don’t deliver a quality service then I negotiate a new price. I haven’t had very many problems at all with this idea that nothing ever gets delivered on time – I had far more trouble when I ran a business back in the UK.

Small businesses in Brazil benefit from a simple tax structure. You just pay tax on the revenue coming into your company. No need for complex offsets or depreciation, just pay a fixed percentage on your revenue. Imagine if Starbucks was doing that in the UK, rather than transferring profit to Switzerland therefore reducing the local profit to nothing and therefore paying little or no corporation tax.

And small business owners get paid on time in Brazil. When I send an invoice to a client I tell my bank that I have sent it and who it has gone to AND when they are going to pay. If the company doesn’t pay then my bank will chase the company – like my own debt collection service. Imagine if small companies in the UK could rely on their bank to help them this way? Why don’t they do it?

There is a very vibrant start-up culture in Brazil and loads of technological innovation taking place in the big corporates and the tiny micro-businesses. State governments are handing out cash to entrepreneurs all over the country without demanding equity in return because they are actively trying to stimulate the start-up culture and the benefits that one big success can bring to a region.

My own wife is a part of this scene. She is travelling all over Brazil meeting traditional artisans and joining them together into a collective called Gift Brazil, so they can harness the power of social media tools like Facebook to promote their traditional art and culture. Can you imagine the market a traditional artist in the middle of the Amazon might usually have for their work? Just the odd tourist wandering past perhaps… now they can be seen by the entire world.

I know that balance doesn’t make for a great story. It’s easier to get clicks on a story if you tell a miserable story, rather than try spreading the good news, but in the year of the FIFA World Cup Brazil is getting showered in bad news. Everything is late, the people don’t want it, it will all be a disaster…

Well there are some great interesting projects taking place in Brazil that are redefining how people work, people are demanding and starting to get more political transparency, and some of us are looking forward to the World Cup – even though I don’t have a single ticket for any of the matches!

Toucan eye

 

Photo by Doug Wheller licensed under Creative Commons

Gringoes: why would you live in Brazil?

I’m a regular reader of the Gringoes.com website. It’s a magazine for foreigners living and working in Brazil and the downsides of being in Brazil are a regular theme of articles and discussion, particularly in the associated Facebook group where readers can vent their opinion openly without the need for an editor to approve what they submit to the magazine.

In the past day there has been an enormous argument raging on the Facebook group because one foreigner wrote a list of dozens and dozens of reasons why he hates living in Brazil.

Every foreign person living far from home has some reason to miss home, but for someone to sit and write a list of 66 – yes 66 – reasons he hates being in Brazil leaves me feeling rather incredulous. This is surely a hatred bordering on obsession?

It is easy to leave. Even if his wife has a good job. Or she wants to be close to her family. He could just leave, return to the USA and swallow the cost of visiting regularly as being better than having to endure a life in Brazil.

But comparing things to home is normal. I knew a British guy who has now left Brazil and he would lament about the quality of shops like Boots. I actually think that the drug stores in São Paulo are pretty good – even if the generic drugs are too expensive.

I spent some time living in the USA teaching kids when I was younger. I had a health-plan provided by my employer and I never needed to use it, but now I am self-employed, I think that finding over $1,000 a month to ensure I can see a doctor when I need one would seriously put me off ever living in the USA – but it’s a place I love visiting.

I spent a lot of time in India and Singapore when I was working for a bank and I had all kinds of comments and thoughts about those places. Singapore is clean and safe and well ordered, but nobody has any real ability to criticise the government – then you end up wondering how much that right is worth if the streets are clean and you have no fear of getting mugged?

In India the poverty is oppressive, even in cities like Mumbai where billionaires and film stars frequent the beaches and luxury hotels. All my foreign friends living there had to be in gated communities, sealed off from the ‘normal’ people – is that really what life in India is about?

And so what about Brazil? It’s true that the country is saddled with an inefficient bureaucracy and it appears there is no desire to streamline any of it – just dealing with the cartorios (notary offices) alone by using biometric identity would sweep away an enormous amount of time checking and stamping forms – often for no other reason than confirming a signature is genuine. But there are probably millions of people working in these offices so the government would give efficiency with one hand and wipe out jobs with the other.

Brazilian drivers are very aggressive. I don’t mind most of the time, but when someone pulls a stunt like overtaking me on a sweeping corner (it happens a lot more often than you might think) and their stupidity is endangering me and my family then I get angry – and there should be no need to.

It is tough to negotiate life in Brazil sometimes. I’m grateful that I’ve got a fantastic wife who can steer me through a lot of the things that would give a foreigner an entirely negative view of the place. I know a British guy who was robbed at gunpoint in São Paulo in his own home, but his Brazilian wife chose a crappy neighbourhood for them to live in where he would obviously stand out – so who is to blame?

I’ve also been lucky to get great professional advice. The accountant for my business had never handled a company like ours before – lots of foreign clients, money coming from all over the world, only really dealing in intellectual property  rather than tangible assets. She studied all the relevant rules to handle our company and has been doing a great job – and it’s needed because even a small company here has to file a tax or regulatory report AT LEAST ONCE A DAY… I did mention there is a lot of bureaucracy here.

Foreigners on the Gringoes website complain of being ripped off – try catching a taxi in India then and asking the driver to use the meter. It won’t happen. They complain of the ‘culture’ in Brazil not being like back home. They complain about how they can’t complain without being ignored.

I have even seen foreigners on the forums talking about how Brazilian music is just not as good as it is back at home. Are they kidding? Have you been out in São Paulo recently? It is packed with live gigs going on every night of the week. I admit, seeing the big international rock acts is expensive, but there is a thriving art, music, and culture scene in Brazil.

And then, when Brazilians respond with a list of all the great things about Brazil it just so often seems to be full of clichés… is feijoada really one of the reasons why people choose to live in Brazil?

The reality is that you can’t define a place with a single broad stroke. There is no Brazil this or that in the same way that living in Louisiana is very different to California or New York. Living far from home is affected firstly by the place you have chosen to be and the people you are with.

For example, if you are used to life in central New York or London then life on a beach up in the rural north east of Brazil might seem idyllic when you first arrive. The sun, the beach, the endless opportunity to live next to the barbecue. After a while though you might start wondering when you are going to next visit the cinema, a theatre, see a rock concert, or meet a friend who has read the books of Anthony Burgess. Living an idyllic life by the beach can have downsides too.

And the people are important. Moving anywhere can be improved by having a partner from that country, but people are people. I’ve met many Brazilian people from São Paulo who don’t even know how to get around their own city. In my short time here I’ve learned more about the public transport infrastructure and different neighbourhoods than they have in a lifetime. And I’ve also seen locals setting up home with their foreign partners in completely inappropriate locations – as I already mentioned.

I’m not suggesting that a foreigner moving to São Paulo has to live in a ghetto of foreigners. It actually annoys me when I meet ex-pats living in the city and they all gravitate to Jardins, Moema, or Brooklin. They are not really the most interesting parts of the city at all, but are considered ‘safe’ so foreigner-ghettos are created and then the cycle is reinforced – these are good places for foreigners to live because others are already there.

So the type of place, the location, the people you are with – these are all factors in creating your personal experience. The cultural complaints I read on Gringoes are all influenced by this – we are all in different places with different people so we cannot just assume the same about Brazil. The Brazil one person experiences can be entirely different to that experienced by another.

When I see the complaints about foreigners being treated differently, getting ripped off, I remember when I was living in São Paulo and every shop owner in my street would wave and say hello as I walked my dog down the street. I had a set of spare house keys in my local bar, in case I ever lost my keys. The taxi drivers at my local cab rank all said hello and were happy to do short or long runs at short notice. I never found any of the negativity I can see expressed on the discussion forums.

I was never burgled or mugged or witnessed any crime during my time in São Paulo, despite the statistics painting an image of the city as one step away from Gomorrah.

Now I live in a smaller town this has only become more accentuated. The paranoid may fear that standing out as the only English person in town might lead to being targeted by burglars or worse, but what have I found? Just a sincere welcome everywhere I go from the barber to the bakery to the bar to the local government – who are all excited about having a real English person help them with some music and culture related to the UK.

In fact, what have I found out about Brazil in short?

  • Business; running a business is bureaucratic. I cannot even personally deal with the number of regulatory and tax reports I need to file – it is more than one report a day. But my accountant does it all efficiently at a reasonable price and the corporation tax on my company is lower than in the UK. It takes a bit of effort to run the firm, but in short, the tax bill is lower than it would be in the US or UK so that can only be a good thing. I am better off that I would be back in the UK and I’m staying on the right law of the law and paying my taxes.
  • World focus; talking of business, I am busier than ever. Brazil is a great place to be as it has survived the global economic downturn and with the next World Cup and Olympic games coming here everyone is looking to do business in Brazil in this decade.
  • Home; I now live in a lovely spa town of about 30,000 people packed full of mineral water springs. I open the window in the morning and see mountains in front of me as the sun rises. I’ve got a pool and sauna at home and space to entertain friends when they come over. I can’t imagine having all this back in London – my last home in the UK was a small flat.
  • Nature; I’m surrounded by the most incredible countryside and real live toucans and parrots fly past – they are not just things you see on postcards from Brazil.
  • People; I’ve met so many fantastic people since I moved to Brazil – some locals and some foreigners living here. There is something about living away from your home country that encourages you to get out to meet more people than if you were back on familiar territory and this can be a wonderfully positive experience. I have even ended up working with the British embassy to promote the UK for business and tourism.
  • Weather; Brazil is an enormous country with searing heat in the north to snow in the south. Where I am living now will be dry until about September and I work outside in the sun almost every day. I’m pretty happy about that – would you prefer a balcony with a mountain view or a dull basement office?

In short, I have personally had a fantastic time since moving to Brazil and I have found opportunities and experiences that would just have never happened had I stayed in London.

There are things I would like to improve in Brazil. Maybe my voice and opinion can help to influence a few changes, but I see so many more positives than negatives. I think that the foreigners who endlessly whine about the problems of Brazil are living in the wrong place.

The foreigners may even be right. They might have a valid point, but if you want to while away your days complaining and dreaming of when you can move someplace else then why not just remember the words of John Lennon:

“Life is what happens to you while you’re busy making other plans.

Airport bus

Tax really can be taxing – moving location in Brazil…

I’m the director of a limited liability company. All my business in Brazil goes through the company and I am paid a salary from my own company. It all works well, and surprisingly, I am taxed less that I was in the UK.

However, running a company in Brazil is onerous  My firm needs to submit something like 30 different tax reports EVERY MONTH to the government which means that I pay my accountant about the same every month that I used to pay every year in London.

The day to day reality is that I trust my accountant to sort out all the tax statements so I don’t worry about it. She gets paid well by her clients to manage their reporting and I can sleep easy knowing that all those reports are filed.

But I’m moving house soon and I just got the shock of my life. By moving 150km north of São Paulo to another town inside São Paulo state, all of my company affairs get shaken to the core.

The town I am moving to does not use the electronic tax system my accountant uses, so I would have to start manually managing all these reports – posting them to my accountant to be dealt with. And this is inside the same state. That is at least one report a day to be manually collected, and posted.

And simply to change the registered address of my company from where I am now to the town I am moving to basically means I need to incorporate the company again with the new details. Plus then inform every government agency that deals with me – there is no central register of companies where I can file my details.

At the end of the day I’m paying hundreds to my accountant to take care of it all, and rather than move the company address to my own offices, I will keep it registered at the office of my accountant so I can avoid a lot of this nonsense. Even just to move the company from my address to my accountant – which is on the same street – means effectively reincorporation and about a month of fees just to change address.

Brazil might not be booming any longer, but it is still growing. If a brave politician stepped in and cut through some of this ridiculous red tape the country might once again experience the kind of growth Europe can only dream of. If only… those people in the company tax offices passed exams to be in their jobs – they now feel they have a job for life. How can a politician change that?

Tax

I’m now a company director in Brazil

I’ve been running IT Decisions with Angelica since I arrived in Brazil. We have been building a really good audience considering we started from scratch and we have spent nothing on marketing or advertising…

All we started doing was writing in English about what IT decision makers are doing here in Brazil. Not what the IT companies are doing or selling, but what the real company bosses with big budgets are up to.

A few months down the line, we are regularly seeing over 10,000 views a day on the site… over quarter of a million views a month on the stuff we are writing about Brazil in a foreign language. Just incredible – we are very pleased as you can imagine.

One of the attractions of the site is that we don’t carry advertising or vendor content. So it’s squarely focused on what buyers are up to and because there are no ads, we don’t have to keep any advertisers happy or skew the content in a particular direction.

That also means there is no income yet. That is about to change with the research network just launching. So we formed a limited company to handle the accounts of the research company. It’s a much more involved process than back in the UK, but despite the complexities of getting it all off the ground, I think that it will be easier to run the company on a day to day basis and I will be paying less corporation tax than I would be in the UK.

Many people complain about the bureacracy involved in starting companies in Brazil, but once over the initial hurdle of paperwork that all needs to be signed, the tax and accounting rules all seem much more straightforward to me. For instance, getting taxed on revenue (rather than profit) seems a negative step, but if the tax rate is reasonable and the process of accounting becomes much simpler then it seems like a good thing to me.

I’m now officially a director of a Brazilian company. Now I’m focused on creating the first million reais!
Angie signing company formation papers

Taxing my drums

I’ve got a Yamaha DTxpress III drum kit. It’s a really nice electronic kit that is great for practicing because you can play the kit wearing headphones, or plug it into an amp if you want to hear the real ‘noise’.

I shipped my kit over from London and during the journey, the computer (or brain), ended up broken. I checked with Yamaha in Brazil and they don’t stock the III computer anymore because the present version of this kit is the IV and the IV computer won’t work with the rest of the kit I have so I scouted around back in the UK for the right computer.

I found a supplier in London who could send me a second-hand computer – £200 for the computer, I bought an extra cymbal for another £40 and then the courier cost was £75.

It’s a pain to shell out so much cash because of a breakage in transit, but I needed the computer for my kit to work again so I paid out and waited for DHL to arrive.

When the courier arrived with my box of equipment, he wanted just under £300 in taxes to be paid, in cash or with a cheque, before he would give me the box. I tried protesting that the taxes are more than the value of the items I bought, but of course the courier couldn’t do a thing – the charges had been applied by the customs people.

I checked with DHL and it turned out I was getting charged a tax for importing electronic products – even though these were second-hand pieces of equipment for my personal use and not to be sold. Unfortunately, there was no way out of the situation.

So now it looks like DHL will send the box all the way back to London, to the company that sent me the equipment. The only saving grace being that they offered to send it on to my parent’s address once it does get back there… leaving me waiting for my drum computer until the next time I visit the UK!

Me playing drums

French government subsidises music

Why on earth is the French government subsidising music purchases?

They say it is to get people into the habit of purchasing music, rather than stealing it through online file sharing. Did any of the bureaucrats ever consider that French citizens might use up their free allowance and then return to file sharing?

The big issue with music is that we are moving from a world where the consumer paid for a physical recording (LP, CD…), to a digital download (MP3), to access only. That’s right – even the MP3 files on your iPod will seem archaic when the next generation of iPods allows you to choose an artist or song, which it then automatically streams.

Most new TVs are already Internet-enabled, you can flick through YouTube as you watch regular TV. Imagine once car stereos, home audio systems, and iPods are all geared up for constant Internet access? There is no need to ever own a physical music product – you just pay for a song as you play it or pay a monthly access fee allowing you all you want to play.

Spotify uses this model already. The one thing that prevents it becoming the norm is that playback devices are still not ready for streaming-only – most people using Spotify are still playing the songs on their computer. But it won’t be long. It’s common to see streaming jukeboxes in pubs now – a jukebox with every song ever recorded and released. And that is what we will all have at home soon, a sound system with access to every song ever recorded.

The future is how you purchase access to recorded music, not purchasing a copy of recorded music.

Charts will be based on plays, rather than sales, and artists will be (more than ever) focused on live performance, merchandise, and specialist products – like the 78rpm vinyl version of the new Elvis Costello album. Who can even play a 78 these days?

Music is entirely changing and for a government to waste tax-payers money on a scheme that encourages ‘legal’ digital downloads is outrageous.

Trocadero and Eiffel Tower

Foreigners get 77% of new jobs

The Daily Express screamed on the front page today that 77% of jobs in the UK are going to foreigners. It’s a rather typical scare story and I’ve already heard of people waving the paper around today and shouting that all those pesky foreigners are coming to steal our jobs.

But the situation is far more subtle and complex. Even thinking about this for just a few minutes typing this blog I can surmise:

  • We live in the European Union. There is a free movement of labour within the union, meaning we as British people can freely go and live and work in other EU member nations. There are more Brits overseas in the other 26 member states (working, or with family, or retired) than this ‘flood’ of immigrants coming to the UK. So, if the UK decided to suddenly pull up the drawbridge, then what do you think would happen to all those pensioners in Spain or Brits working in France and Germany?
  • Many of the Europeans coming to the UK for work are extremely mobile, which works in their favour. Not many Brits living in Newcastle, and suffering a life on benefits, would jump at the chance of a job in Bristol, or Reading, or even London, if they were only slightly better off. We are not a very mobile society in the UK and this creates structural unemployment where hundreds of thousands of jobs are available, but nobody locally wants to take them.
  • And, in that kind of environment what do you expect will happen? Britain does have a lot of employment available, but it’s not always where people want to work or live. That’s not a problem for someone coming in from overseas who can arrange their accommodation close to their work.

But let’s be clear, these non-British Europeans are not coming in and ‘stealing’ jobs. I’m sure most businesses advertising jobs would be only too delighted to be hiring and supporting local people. But what do the companies do when no locals respond to the job adverts? Go bust because they have no staff? Of course they take the search further afield, and if Brits are not prepared to move 50 miles for a job, then it’s easy to find others within Europe who are happy to work hard, pay their taxes, and add something to the community they move into.

This is not so much a story of foreigners stealing jobs, it’s a story of British people failing to adapt to the international nature of work in the twenty-first century and the DWP not offering enough incentives for those already on benefits to cast the net a bit wider when seeking work.

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