South-South Experts Knowledges Sharing Forum July 2018 Manila, - PowerPoint PPT Presentation

South-South Experts Knowledges Sharing Forum July 2018 Manila, Philippines

MSE Simplified Regime July 2018 Manila, Philippines Mauro Oddo Nogueira Researcher

Summary 1 Contextualization 2 Informality and Semiformality Entrepreneurship in Brasil 3 MSE Simplified Regime Evolution 4 Challenges 5 6 Conclusions

Contextualization 1 Título 1

MSE Simplified Regime • Brazilian context: � Population: 208 millions � Economically active pop: 112 millions � Federation: � 26 states + 1 Federal District � 5.570 municipalities � All of them with some autonomy in taxes and business regulation

MSE Simplified Regime • Brazilian context: � Public health and basic and secondary education: universal coverage (1988 Constitution) � Social Security = Public pension system

MSE Simplified Regime GDP Growth rate (%) 10 8 6 4 2 0 -2 -4 -6 Source: IBGE

MSE Simplified Regime Gini Coefficient (2001 - 2017) 0.60 0.59 0.58 0.57 0.56 0.55 0.54 0.53 0.52 0.51 Source: IBGE

MSE Simplified Regime Average unemployment rate (2010 – 2018) 14 12 10 8 6 4 2 0 2010 2011 2012 2013 2014 2015 2016 2017 2018* Source: IBGE.

MSE Simplified Regime Labor conditions (2010 – 2017) - % 55.0 52.1 50.4 48.0 50.0 45.0 40.0 35.0 30.0 25.2 25.6 23.4 22.5 25.0 22.3 22.9 20.0 22.1 19.8 15.0 2012 2013 2014 2015 2016 2017 With Card Without Card Autonomous Source: Pnad.

MSE Simplified Regime Number of people – evolution (%) Accumulated ( 2012 a 2017 ) Post Crisis ( 2014 - 2017 ) Pre Crisis ( 2012 - 2014 ) Activities Activities Activities W/Cart. W/Cart. W/Cart. WO/Card. WO/Card. WO/Card. Autonom. Autonom. Autonom. MEI MEI MEI Agriculture, forestry and fishing Agriculture, forestry and fishing Agriculture, forestry and fishing - - - 6,14 0,66 8,49 - - - 15,40 13,80 7,53 - - - 10,61 23,82 16,54 152,11 62,58 55,07 Mining and quarrying Mining and quarrying Mining and quarrying - - - 14,87 12,53 1,10 - - - 14,23 31,00 34,33 - - - 16,51 29,35 9,31 - 62,50 68,75 3,70 Manufacture Manufacture Manufacture - - 16,41 13,39 6,87 - - - 8,69 2,07 4,41 19,87 11,94 3,14 175,11 69,52 62,28 Eletricity and gas Eletricity and gas Eletricity and gas - - 12,71 1,19 5,51 - - - 44,77 45,57 1,25 - 159,86 61,91 71,27 - - - Water supply, sewerage, waste man. and remediation Water supply, sewerage, waste man. and remediation Water supply, sewerage, waste man. and remediation - - 12,04 25,80 8,43 - 12,56 0,57 1,16 - 27,33 18,38 4,92 230,01 77,22 86,21 Construction Construction Construction - - 26,25 38,00 5,09 10,75 6,82 0,96 - 14,17 3,14 7,89 249,84 93,42 80,87 Trade; repair of motor vehicles and motorcycles Trade; repair of motor vehicles and motorcycles Trade; repair of motor vehicles and motorcycles - 8,28 3,41 5,04 - 0,58 4,24 4,09 17,59 9,42 9,74 167,30 69,57 57,63 Transportation, storage and mail Transportation, storage and mail Transportation, storage and mail - 9,40 4,69 7,19 - 21,65 9,71 5,40 30,43 24,96 5,01 279,41 95,25 94,32 Accommodation and food service activities Accommodation and food service activities Accommodation and food service activities - 17,88 12,00 1,34 24,08 34,83 9,50 70,54 61,56 5,75 203,28 75,07 73,23 Information and communication Information and communication Information and communication - - 14,97 2,33 5,29 - - 17,20 26,27 19,15 31,25 53,19 66,82 106,22 293,98 91,04 Financial and insurance activities Financial and insurance activities Financial and insurance activities - 13,18 8,14 2,68 - - - 16,02 0,12 5,45 53,66 38,45 6,70 - - - Real estate activities Real estate activities Real estate activities - 32,25 9,57 9,04 - - 19,92 11,86 2,62 26,55 35,72 18,74 - - - Professional, scientific, technical activities Professional, scientific, technical activities Professional, scientific, technical activities - - 18,38 11,07 5,74 - - 12,25 1,69 1,83 49,24 25,05 52,11 277,84 107,85 81,79 Administration and support service activities Administration and support service activities Administration and support service activities 11,51 8,71 0,90 - 2,48 9,56 3,85 18,29 28,67 49,28 206,01 69,15 80,92 Public adm. and defence, compulsory social security Public adm. and defence, compulsory social security Public adm. and defence, compulsory social security - - - 14,73 12,24 4,26 - - - 0,90 2,82 5,03 - - - 13,70 86,35 84,13 - - - Education Education Education 20,28 17,75 13,91 33,07 41,21 39,80 41,74 11,67 25,18 279,86 96,67 93,14 Human health, resid. care and social work activities Human health, resid. care and social work activities Human health, resid. care and social work activities 16,05 29,49 13,53 30,73 31,21 8,55 22,15 28,60 32,88 879,11 262,98 169,74 Arts, entertainment and recreation Arts, entertainment and recreation Arts, entertainment and recreation - 20,02 11,55 8,39 3,57 7,94 0,41 13,13 8,42 2,35 152,80 397,46 96,78 Other services Other services Other services - 20,68 19,76 2,24 10,86 7,55 5,90 29,58 12,52 38,64 176,03 62,71 69,65 Activities of households as employers Activities of households as employers Activities of households as employers - - 0,58 1,21 3,54 - 11,72 9,54 1,89 248,57 248,57 - Source: Pnad (IBGE) and Sebrae.

Informality and Semiformality 2 Título 1

MSE Simplified Regime • Informality in Brasil: � Enterprises: � No official registration / Cadastro Nacional de Pessoa Jurídica – CNPJ (Nacional ID Firm Number) � Labor: � No labor contract / Carteira de Trabalho e Previdência Social – CTPS (Work and Social Security Card) or Public Servant or Formal Entrepreneur

MSE Simplified Regime • Semiformality: � From formality to informality � From informality to formality S E M I F Continnuum O FORMALITY INFORMALITY R M A L I T Y

MSE Simplified Regime Estimations of informal economy in GDP (%) Annual Source Period 2003 2004 2005 2006 2007 [...] 2013 average rate (%) Schneider, Buehn e Montenegro (2010) 1999 a 2007 39,6 38,6 38,4 37,8 36,6 - - -1,35 Hallak et al. (2012) 2000 a 2007 24,3 22,9 22,4 21,6 21,4 - - -3,36 Etco (2014) 2003 a 2013 21,0 20,9 20,4 20,1 19,4 - 16,2 -2,57 OCDE - Schneider et al. (2010) 1999 a 2007 17,3 17,1 17,0 16,8 16,6 - - -0,8

MSE Simplified Regime • Simplified Regimes: � SIMPLES = Lei Geral (General Law) � MEI – Microempreendedor Individual (Individual Micro Entrepreneur) � Main Goals: • Reduce informality and semiformaly • Extend social security protection

MSE Simplified Regime Companies and personnel employed by size (2011) Personal Number of Personal Size Firms (%) employed firms employed¹ (%) MSEs 7.241.808 97,8 20.470.780 54,2 Individual entrepreneurs (MEI) 1.664.447* 22,5 1.698.999 4,5 Micro enterprises 4.685.702 63,3 10.181.308 27,0 Small enterprises 891.659 12,0 8.590.473 22,7 Medium and large companies 159.908 2,2 17.292.138 45,8 Total 7.401.716 100,0 37.762.918 100,0 Source: Sebrae (2014) In 2017 the total number of MEIs reached 7.6 million.

Entrepreneurship in Brasil 3 Título 1

MSE Simplified Regime Entrepreneurs distribution by opportunity and necessity as proportion of beginners entrepreneurs (2002-2016) - % Motivation 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Opportunity 42 53 52 52 51 56 67 60 67 68 69 71 71 57 57 55 43 46 47 48 42 33 39 31 31 30 29 29 43 42 Survivalist Source: GEM, IBGE, Banco do Brasil e Ipeadata * The sum may not add up to 100% due to the fact that in some cases it was not possible to distinguish if it is due to opportunity or necessity.

MSE Simplified Regime Evolution 4 Título 1

MSE Simplified Regime Simples Nacional – Tax Collection (2002-2017) Billions Year R$ US$ 2012 46,5 23,3 2013 54,3 24,4 2014 61,9 28,0 2015 69,7 22,5 2016 72,6 22,7 2017 86,2 26,1 Source: Federal Revenue Service

MSE Simplified Regime Simples Nacional – Evolution (2009 – 2014) Millions 10.00 9.52 9.19 8.82 8.51 8.22 8.00 7.35 6.00 4.00 2.00 2.21 2.38 2.58 2.65 2.48 2.47 - 2009 2010 2011 2012 2013 2014 Nº Companies Personnel Employed Source: Federal Revenue Service

MSE Simplified Regime Public Procurement Evolution (2013 – 2017) % Accumulated US$ Billions 100% 25 90% 80% 20 70% 60% 15 50% 40% 10 30% 20% 5 10% 0% - 2013 2014* 2015 2016 2017 2013 2014* 2015 2016 2017 Micro enterprises Small enterprises Other sizes Total Micro enterprises Small enterprises Other sizes Source: MDIC * Micro enterprises - estimated

MSE Simplified Regime Total amount of MEIs (2010 - 2017) Millions of people 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2010 2011 2012 2013 2014 2015 2016 2017 Source: Sebrae