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Social Security Loses Taxpayers, But Contributions Remain Stable

11/01/2017 - 11h20

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FERNANDA PERRIN
FLAVIA LIMA
FROM SÃO PAULO

Approximately 1.4 million workers have stopped making Social Security contributions since 2014, at the beginning of recession, according to the data published by the Brazilian Institute of Geography and Statistics (IBGE) on Tuesday (31).

The number has grown in 2017. The percentage of workers contributing to retirement savings fell by 63.8% for the quarterly period ended in September.

The decrease, however, did not impact Social Security revenues, which have shown a small recovery in 2017, after dropping by 10.8% (between 2014 and 2015).

A possible explanation for the paradox is the asymmetrical recovery of the labor market, says economist and professor at the University of São Paulo, Luis Eduardo Afonso.

Although unemployment rates declined from 13%, for the quarterly period ended in June, to 12.4%, for the period ended in September, such improvement is due to the informal market.

Informal workers continued contributing in 2016. Since then, however, economic expectations may have worsened to the point such workers can no longer contribute, says Bruno Ottoni, from Fundação Getúlio Vargas (FGV).

Similarly, the number of workers engaged in formal employment, whose contribution is deducted from payroll, continues to fall.

The drop in proportion of taxpayers raises a red flag to Social Security, whose shortfall is becoming more acute year by year; the Social Security reform is at a deadlock in Congress, and analysts expect the approval of a diluted version of the bill.

Meanwhile, expanding outsourcing would allow workers to be hired as legal entities, paying less taxes than registered employees, states Ottoni.

Translated by ANA BEATRIZ DEMARIA

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