Brazil: Taxes destroying ideas – Luiz Carlos da França, Brazil

In a extremely heterogeneous place of much creativity and vibrant colors, the bureaucracy, which should warranty the freedom, becomes a burden. Brazil, the most expensive country in the world concerning  iPhones, also hosts two editions of one of the biggest fairs about technology and internet on the planet: the Campus Party.

The Campus Party is a yearly event linked to technology where thousands of hackers, gamers, developers and businessmen meet with the main objective of sharing  knowledge and spread ideas. The Brazilian version is hosted in the cities of São Paulo and Recife. Huge events like this show the interest and potential Brazilians have in the field of technology. However, the young entrepreneurs feel trapped, with their potentially revolutionary and creative ideas thwarted by governmental policies, like high taxation.

The Issue of Taxes

The Brazilian tax system is one of the most expensive and complex of the world. According to a study conducted by the World Bank named “Doing Business 2011” regarding tax rates, Brazil occupies the 152 position, within 183 economies in the world.

Such inefficiency becomes more clear, when talking about the taxation of electronic goods: 40% of a smartphone’s price is VAT (Value Added Tax),  and with videogames, VAT soars to 71%.

Taxes

So, high taxation keeps companies from investing in the country, since the financial return will likely be significantly affected by bureaucratic matters. Multinational enterprises, such as HTC and Nintendo, already experienced this trouble and have recalled their official representation in Brazil.

People That Brazil Lost

A great example of an innovator Brazil lost is Hugo Barra. The Brazilian, currently 39 years old, went to work at Google at 32, where he lead the development of products for the Android operating system. In 2013, he decided to leave Silicon Valley to become vice-president of a new company in China named “Xiaomi”.

Hugo Barra

Nowadays, Xiaomi is is the world’s third largest smartphone producer and second in Asia, behind Samsung. They started to export their products worldwide only recently, already establishing a good position in the global market along other well-known industries, like LG and Samsung. Hugo Barra’s help was crucial in the growth of the Chinese giant. His competence, along with his great entrepreneurship skills and IT knowledge were of great value to Xiaomi.

Alex Kipman, who spent years unsuccessfully trying to convince other companies into developing his ideas, is now the creator of Kinect and lead developer of the popular and ambitious project “Hololens”, as well as one of the most important employees in Microsoft’s creativity department. Even though Kinect that would become the second most-sold electronic gadget in 2010, this Brazilian did not seek to start-up a company in Brazil, since the bureaucracy and taxes there, would likely lead his initiative to failure.    

Alex Kipman

Even though Alex Kipman and Hugo Barra could, theoretically, dominate the Brazilian technology sector; for them, it’s more strategic and rational to develop their ideas in a country away from Brazil.

In an extremely globalized and technology-dependant world, it is beyond any reasoning why a country would not focus on the booming technology sector. As senator Vital do Rego said “only a country that invests in education, science and technology can resist economic convulsions”. On a more positive note, however, Brazilian people keep fighting to eventually overcome these obstacles and events like Campus party never fail to show to the state that the whole country has a lot to gain from technology. As for now, however, the lamentable truth is: a Brazilian Apple would hardly leave a garage.

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