Client: Municipality of Belo Horizonte, Brazilian Regional Government Industry: Governance Solution: Development of customized Digital ISS software
The Municipality of Belo Horizonte, one of the largest cities in Brazil, has improved its detection of tax evasion by businesses, as a result of implementing an electronic ISS declaration (Tax on Services of any Nature), developed by SONDA.
During the past few months, a total of 50,000 companies in Belo Horizonte, the third largest city in Brazil, have received notices informing them of irregularities that have been detected in their ISS declarations, while 13,000 companies who did not file any declaration may be fined by the Finance Department at the Municipality.
“Our goal is not to punish, but to educate. We seek voluntary compliance with the obligation to declare taxes” said Edgar do Carmo Ferreira, Technical Auditor for Municipal Taxes and the Digital ISS Program Coordinator.
Companies with a tax dispute in Belo Horizonte can now be investigated, as the Finance Department at the municipality installed a technological Digital ISS solution from SONDA in November 2003, which issues the ISS settlement document and electronic tax declaration, similar to an income tax declaration. The government of Belo Horizonte now collects R$ 21 million per month in ISS using this system, which represents a growth of 16.6% over the monthly average in 2003 of R$ 18 million. The objective is to collect R$25 million per month.
The system was developed by SONDA and provides the municipal government with more control over taxable movements, through matching information from suppliers and customers receiving services. It identifies indications of evasion, which results in audits becoming more efficient. For example, an auditor can now complete an audit within 20 days, which used to take up to 6 months.
Edgar do Carmo Ferreira adds that despite the municipality still having serious problems due to tax evasion, companies have adapted well to the Digital ISS solution. He concluded “The main difficulties experienced by companies were a lack of control and of fiscal organization, and they had requested changes to improve the tax declaration process”.
Paulo Enrique de Oliveira is the Director of Government Services at SONDA Brazil, and he said “The primary objective of the system is to simplify the relationship between the municipal treasury and taxpayers and to cut out bureaucracy”. The Executive explained that the software has a facilitating role for companies and prevents unfair competition. He added “The company that has evaded taxes obviously has more capital and greater bargaining power, which is highly unfair in business relations, in addition to being an illegal practice”.