brazil report 2007

30 municipal geographical distribution of stores in

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Unformatted text preview: operations today. Tax Project Existing Wal-Mart stores Existing Bom Preço stores before purchase in 2004 Existing Sonae stores before purchase in 2005 Doing Business in Brazil from a Tax Perspective Tax burden in Brazil is one of the highest in the world. While the average of the emerging markets is 16% of GNP, the tax burden in Brazil is 38%. Brazil taxation system is complex, detailed and very dynamic with more than 23,000 changes per year. The legislation is not combined in a unified source, having its laws presented by the federal tax code and several other amendments. The tax law then becomes a dynamic changing document, rather than a static and consistent one. Additionally, the federation States each have their own tax code based on their legislation. In numerous instances the State tax law is not consistent with the Federal code, creating legal discussions and disputes as to the legality of the laws. This scenario presents a unique challenge for retailers, as the large product assortments are subject to numerous fiscal requirements that vary from product to product: The challenge Wal-Mart’s corporate systems are known as being the most complete, robust, and to be capable of adding value to the business as no other in the retailing business. Nevertheless, it did not have the capability of dealing with such a complex tax environment as it finds in Brazil. Having the possibility of adding the tax functionality to the existing engine would bring to Brazil all the rest of the functionality that the system already has. While adding new stores and entering new states created manageable liability, the acquisition of complete chains of stores (Bompreço and Sonae) created an even more significant opportunity. The challenge was to guarantee that the tax system would fulfill the Brazilian tax legislation and fit the recurrent changes over the years. It would have to be achieved in the shortest time frame and the lowest internal impact possible, knowing that Wal-Mart would have to deal with the largest and most intrusive system change ever endured. Scope Wal-Mart team in Brazil has started developing the system specifications and these were translated to programme code by the different focus teams in Bentonville by the Information System Division. This by itself was a task larger than the y2K and Euro conversion effort put together. • Indirect taxes are embedded in product cost; retailers become tax collectors. 28 2006/2007 FROM SÃO PAULO TO SHANGHAI – New consumer dynamics: the impact on modern retailing* An effort such as this has no means of achieving success if the commitment of all the stakeholders was not present. All main executives in Bentonville1 have been involved and their participation has had a significant importance. Areas such as legal, tax, information systems, merchandise, vendor relationship and many others have had to act in a coordinated way with their counter parts in-country to deliver a compliant product to the internal customers (users in Brazil). PRICEWA...
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