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Cisco Offices Raided, Execs Arrested In Brazil
Many readers are writing in about the raids and arrests in Brazil's Cisco operation. At least 40 people were arrested earlier today, and Brazilian authorities asked the US to issue arrest warrants for five more suspects in this country. The allegation is that Cisco brought at least $500M of equipment into Brazil without properly paying import duties, and now owes over $826M in taxes, fines, and interest.
Sending them a tax bill seems a bit more sensible than arresting every janitor and secretary in the office. Is Brazil trying to frighten away foreign investment?
A slashdotter who didn't build his own computer is like a Jedi who didn't build his own lightsaber.
Well, that figure includes fines and stuff... the actual tax rate is probably closer to 100%.
For some odd reason, latin american countries charge a ridiculous amount of tax on electronics. In the Dominican Republic you can expect to pay double or triple the normal price for any and all imported electronics. I tried to have a $300 camera sent to me via DHL, and they wanted $400 to pick it up from customs (13000 pesos).
I call that the opposite of progress... unfortunately many governments can't see beyond "now." "Oh hey... we can just charge a ridiculous amount of money on imports and make money!!! we win!"...... (I understand the tarrifs to help local businesses... but honestly... there aren't any camera manufacturers in any of those countries).
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This will probably turn into a pretty rapid-fire he-said she-said involving bribes, corruption, and really bad moves.
The high tarrifs, bribes, and corrupt officials make this kind of thing inevitable, but it was still stupid to try to get around the taxes. Understandable, in the sense of closing your fruit stall during the shift of the corrupt cop who collects protection money, but still stupid.
The problem is that, like India, the Brazil market is big enough for people to take risks to sell there.
We'll have to see how it turns out, but I'd place a small bet that the local Cisco office bribed the wrong official - who either turned on them or done got themselves busted.
That's why a (relatively) honest system is so important - certainty.
9) The Brazilian media constantly emphasizes violent events in
Brazilian cities. However, the murder rate in Rio de Janeiro was, the last
time I checked, about two-thirds of the murder rate in the U.S. capital city,
Washington, D.C. The murder rate in Rio de Janeiro is about 60 per 100,000 people and the rate in Washington DC is about 35 per 100,000 people so you really need to work on keeping up to date if you plan to make claims like this. 10) Brazil is the music appreciation capital of the world. Brazilians
have all the styles of their own music, and those of other countries, too. What does this even mean. Every kind of music can be found in many many places in the US. Does that make us the music appreciation capital too? Is there some kind of international body that decides these things? I googled but came up with nothing so I'm left to assume you are just pulling things out of thin air cause they sound good. 11) Several years ago the most popular local band in Portland, Oregon
was Rubberneck. On an average night they would draw an
audience of 40. A local band in a small town in Brazil drew an audience of
800. There is going to be a lot more choices for entertainment in a place like Portland as compared to a small town in Brazil. This will lead to less people at any one show but not necessarily less going to enjoy a show. This is a weak argument that tries to make parallels where none should be made. 12) Brazilians often know all the lyrics to numerous Brazilian songs. WTF does this mean?!? Please find a country that has music with lyrics and doesn't have people who know numerous of the songs. Then, maybe, this point would be worth typing out. 13) There is a magazine about Brazil called Brazzil, based in Los Angeles,USA. That's good. We probably have magazines for the majority of country in the world. 14) Brazilians are often very socially skilled. Wow, I bet they eat and sleep like normal people as well but you forgot to list it. 15) Brazil is approximately as large as the continental United
States. It's not a lot but since Brazil is 200,000 square miles smaller I wouldn't say it's the same size. I also wouldn't use total land mass as the best measurement. How about productivity / population?
Alternatively, since most of America speaks a latin derived language (except the USA and Anglo-Canada), we might start using Angloamerica for the exceptions.
The best way to predict the future is to invent it
4. Don't do business in Brazil.
If enough major corporations chose option 4, the problem would rectify itself.
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If you raise taxes, you get less compliance, not more. You can raise them to the point where compliance is a literal impossibility and it sounds like they are reaching that point, or passed it. The workable answer is to have reasonable taxes and work on increasing compliance.
Imagine if a store took a similar tactic: Some people steal merchandise, and others simply choose to go to other stores. Rather than perhaps raise prices a bit to cover costs and work on advertising and loss prevention the owner says "Well because people aren't buying, I have to double prices." Now the number of shoppers drops even more, so the owner again says "Even less people are shopping here, so I have to triple my new prices." Eventually nobody at all buys anything because it's just too expensive.
Similar shit with taxes. If the government raises your taxes a bit, maybe you complain but you still pay them. But let's suppose now that the government set them to an unaffordable level. Suppose that the government took 50% of your income, sales tax was also 50% and then other taxes like property tax added up to be over 100% of the rest of your income. Suppose that there was literally no way you could pay all the taxes. What would you do? Live in the street and try to pay them, or simply avoid them to the maximum extent possible?
It's easy to get a high and might attitude of "Well everyone should just pay," when it's not your ass in the fire and your family going hungry. However you try it some time, see how it goes.
If people cannot comply with the law, they just won't.
So much for Brazil's IT sector for the next decade or so.
Any businessman would have to be nuts to open an office there after this.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
I am brazilian as well and I agree that the tax system there is idiotic. The distorted logic is that high import tariffs somehow foster the development of a national industry. It's a game of vested interests, bribes, corruption, etc.
... is that too much to ask?
However, if CISCO is found guilty I will commend the authorities for what they're doing.
Reality, my friend, is that people shouldn't choose which laws to follow, which laws to break. The involved executives, if proven guilty, are not preaching civil disobedience. Instead, they want to increase the bottom line and have a fat bonus at the end of the year. That's exactly the reason why Brazil is what it is today. And by somehow condoning or justifying their business practices we're simply perpetuating the problem. Can't we just be honest and obey the freaking law? Really
Finally, your characterization of the problem with public servants in Brazil wasn't exact, I'm afraid. It's true that we don't have the entrepreneurial spirit seen in countries such as the US, and many people do grow up to work for the government, partly because of also distorted labour laws, who give these people the so called "stability", which can be understood as "I can be a slack and not get fired".
However, many public servants are responsible citizens and you shouldn't hold that against them. Both my parents were public servants (they retired after 30-something years working) and they are some of the most hard working people I've ever seen. I have many friends who work for the government, some by choice, and they are all responsible, hard-working people. And just to clarify, I believe only congressmen and senators retire after 8 years. Statistically speaking they are the vast minority.
My 2 cents.
Regards,
Andre
"Any businessman wanting to evade US$ 1.5 billion in taxes would have to be nuts to open an office there after this."
There. Corrected that for you.
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No offense to my argentinian "hermanos", but Argentina is about as multicultural as a WASP meeting. I don't see why people are so upset with the case. People committed a crime (it is a criminal offense here), they go to jail. I wish more high-ups would go to jail when caught wrongdoing.
To all trolls that keep saying "stop doing business in Brazil", do you really think CISCO and others do business here because they want to be kind to us? They want us to have access to that-oh-so-nice-and-advanced american hardware so we can be happy? They want to sell their stuff and that's all. If they leave the market, someone else will take it. And in case you haven't noticed, China has been replacing US as a hardware provider. Perhaps they still haven't got routers as good as CISCO's, but they will eventually. And if american companies leave markets open to them, the quicker they will. So good luck for any american companies wishing to leave the brazilian market.
Besides, the ones who really suffer with the high taxes and corruption are brazilian people and consumers. I highly doubt CISCO passed on the savings they got to their clients. Stop whining just because some american company was caught red-handed.
Where is that guy who'd die defending what I had to say when I need him?