Last year, the COVID-19 pandemic hit several sectors of the country, particularly health, some businesses and education. Many were laid off and with unemployment rising, they saw entrepreneurship as an opportunity to earn their income and grow financially. However, many people are facing the harsh reality of what is to come in Brazil.
According to the Doing Business 2020 Ranking, a survey conducted by the World Bank to analyze the countries with the easiest way to do business, Brazil has been ranked 124th out of 190 countries, which has proved to be one of the most difficult. New Zealand, Singapore, Hong Kong, Denmark, South Korea and the United States lead the ranking, the best countries in the world to start a company.
But what exactly makes Brazil such a difficult country to work in? One of the reasons is the long period of around 80 days along with many bureaucratic steps to be able to open a formal company. Even for micro-entrepreneurs, regulation is not so quick, as in addition to registering as an individual micro-entrepreneur (MEI), authorization from the city hall is required to be made official, a process that involves municipal corporations. It may take a few days depending on .
High taxes are also an obstacle, in addition to federal taxes such as COFINS, PIS, CSLL and IRPJ, there are still state and municipal taxes that directly affect the cash flow of a Brazilian entrepreneur. Another study conducted by the World Bank concluded that in order to be able to pay all taxes in Brazil it is necessary to work 2600 hours per year.
Compared to the United States, one of the largest economies in the world, the process of starting a business is less bureaucratic and has a lower tax burden. It is estimated that the time to settle a business is two to five business days in most states, and no more than 20 days, depending on the state.
The hurdle of starting difficulties in Brazil forces entrepreneurs to think about internationalizing their business apart from giving more profit opportunity without having to go through such bureaucracy. For example, to start a company in the United States, you don’t even need to be on American soil. The country’s labor, tax and trade regulations also contribute significantly to the success of the enterprise. An important and distinct feature of Brazil is that company taxes are paid in proportion to the profits earned annually by the partners.
If Brazil does not reform its tax policy and reduce bureaucracy, it will fall further and further behind in terms of entrepreneurship, not only allowing its citizens to open their own businesses and contributing to the country’s development, but Also to drive away entrepreneurs from other countries. Invest here, thus becoming a separate country in business.
*Renato Alves is Director of Extension at Bickleho Consultoria Legal, a company specializing in migration, internationalization of business and franchising.