Time to Say 'Enough'? Brazilians pay 61 different taxes. And a proposed new levy on the service sector has sparked a rebellion.

Byline: Mac Margolis

Late in the 18th century, when Brazil was still a Portuguese colony, the natives were restless. So they called on Joaquim Jose da Silva Xavier, a soldier, prospector and sometime dentist (hence his nickname, "Tiradentes"), to lead a tax revolt. Their grievance: one of every five kilos of Brazilian gold went straight to Lisbon's bottomless royal coffers. The rebels called it the "fifth from hell."

What would Tiradentes say now? More than one of every three reais Brazilians earn goes to local, state and federal governments, an alphabet soup of levies--ICMS, COFINS, CPMF--numbering 61 in all. There's a tax to register newborns and another for death certificates. Importers pay a fee to support a nonexistent merchant marine--perhaps on the hope that Brazil may one day have one. There are taxes on top of taxes, nearly doubling the retail price of a can of beer or a schoolchild's lunchbox. No wonder the symbol for the Brazilian internal-revenue service is a lion.

Now Brazilians are growling back. Last week nearly 2,000 executives from small- and medium-size companies gathered in a spacious auditorium in Sao Paulo to protest the nation's bruising tax burden. In their sober blue and gray suits and polished shoes, they looked more like conventioneers than conspirators. But the mood at the Clube Esperia, a recreational center on the city outskirts, was anything but congenial. The immediate target was MP 232, a "provisional decree" handed down in the waning hours of 2004 by President Luiz Inacio Lula da Silva; the law would hoist taxes by 25 percent for scores of service-sector professionals, from caterers to physicians to security guards, who together account for more than 13 million jobs. Accountants estimate that if the measure is passed by Congress, 100,000 service-sector jobs would be lost and twice as many small businesses could be driven to the informal economy to avoid taxes. One by one, the protesters decried the decree as "dictatorial," "arbitrary" and "suffocating" to enterprise. "Brazilians work the first five months for the government, then for themselves," says Ives Gandra Martins, Brazil's foremost tax expert. "We are taxpayers before we are citizens."

Grumbling over lordly governments is as old as Brazil, of course. What's new is that ordinary taxpayers are finally fighting back. That may be because government appetites have gotten out of hand. In just 15 years, the official tax burden has risen from under 25 percent to 35.5 percent of GDP (or 37 percent, according to independent auditors). Brazilians pay nearly double the taxes of Chileans and Mexicans, and half again that of Argentines. Although the increase predated Lula, who has won praise from the capital markets for his policy of tight money and big budget surpluses, such parsimony is not likely to last. Lately Brasilia has been on a spending binge. Since taking office in January 2003, Lula has added some 45,000 jobs to the public payroll and increased overall personnel expenditures by 185 percent. "Brazil managed to abolish the monarchy but not the court," says Guilherme Afif Domingos, president of the Sao Paulo commercial association, and a leader of the taxpayers' rebellion. "Now it's time to say 'enough'."

Even the steepest levies might be forgiven if the Brazilian bureaucracy were nimble and efficient. Jose Dirceu, Lula's chief of staff, recently justified the soaring tax burden in order to "modernize" the civil service. But that is not how Brazilians see things. The running joke is that Brazilians pay "Scandinavian taxes for ...