High taxes cause creative evasion

Dan Grech Oct 17, 2007


Scott Jagow: I’m sure the legal department at Cisco Systems is quite busy this morning. Late yesterday in Brazil, authorities raided Cisco offices and several homes. They arrested 40 people, including Cisco executives and Brazilian tax officials. The allegation is that Cisco has been avoiding taxes on imported computer equipment. From our America’s Desk at WLRN, Dan Grech reports.

Dan Grech: Brazil says a Cisco reseller used tax havens like Panama and the Bahamas to skip out on $833 million in import taxes. The federal police seized $10 million in merchandise during yesterday’s raids.

Tom Rideg is Brazil director of InfoAmericas, a consulting firm. He says the raids point to a larger problem in Brazil: corporate taxes are too high.

Tom Rideg: We pay First World taxes, but we’re a Third World country. And I can say this ’cause I’m Brazilian. It really makes it difficult.

Brazil’s tax burden is the equivalent of 35 percent of GDP, a level of taxation on par with Europe.

Chris Garman is with the Eurasia Group:

Chris Garman: This creates a perverse incentive in which companies, in order to become more competitive, do try to seek creative means to try to reduce their taxes.

No formal charges have been brought against Cisco for tax evasion. The company says it’s cooperating with the investigation.

I’m Dan Grech for Marketplace.

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