INTRODUCTION
There are unknown harm that informality because in a society, may fall as much as a social and economic problem. The informality reaches double the country damaging the collection of taxes relating to economic activities and also depriving many workers of their rights, condemning them to the uncertainties about its future, living in fear at any time find themselves in a sticky situation without any assistance.
The concept of informality, as will be shown during this survey covers more than just the picture mentioned above, informality can be linked to illegal practices related to tax evasion, to obtain advantages for financial gain through the failure to fully respect the laws taxation. The research, however, focuses only on informal work as a marginalized economic activity that causes damage to the country and workers. Finally, we will stick to the informality that can be lowered, or as suggested by the title of the research, countered by the incentives, preparation, creation of a structure more favorable to the proliferation of Micro (ME) and Small Business (EPP) by encouraging entrepreneurship and the solidification of a system that allows creation and especially the survival of these companies. These companies that have great potential for growth of formal employment, enabling a more equitable revenue and giving the guarantees essential to the tranquility of Brazilian workers.
Worldwide economic changes, augmented by advances in information technology and the popularization of basic management methods associated with the process of deindustrialization and the expansion of the service sector, led to microenterprises and small businesses assume, as in the early 1980s, a role in the economy of many countries, accounting for much of the employment and income generation (Spinola, 2003).
Also in Brazil, the ME and the EPP reached this importance. According to estimates, they represent over 95% of all corporations in the country. Sensitive to this new reality in the world economy and national constituent of the legislature in 1988 gave the State the responsibility to encourage micro and small businesses (BRANCH, 2004).
The micro entrepreneurs, however, face many difficulties, numbers that will be presented later on show that the mortality of these companies is still considered high, the tax burden and lack of guidance in the implementation process of these companies can be considered as decisive factors for the failure these projects.
Given the important economic and social well that the ME and the EPP for the country have incentive policies are really necessary, since the informality is associated with increased taxes impressed by the various levels of government, without any corresponding benefits are perceived collectively or individually. That is currently the level of taxes in the country is not compatible with the government’s actions with regard to the destination, the use of funds raised.
The framework described certainly does not come with the proposal of the research, defended the idea here. Some actions by the government are described and the need for change.
This research then aims to address the micro and small businesses as an alternative to combat informality in Brazil and its negative effects. Understanding how the institution of ME and EPP can provide extremely positive results in combating informality.
The relevance of this research lies in the fact that informality in the country today has resulted in damage to both the collection and for workers’ rights. Having in the ME and the EPP an alternative to combat informality, see the possibilities, difficulties, pointing out ways to better use these companies with respect to incentives, bureaucracy, preparation of entrepreneurs, among others.
To achieve the objectives mentioned in the preceding paragraphs the research follow with the definition of Micro and Small Firms, seeking to demonstrate the different criteria for the classification in these categories as well as criticism of the method legally adopted in Brazil. Next will be described and commented on the General Law of ME and EPP allowing you to see the peculiarities that these companies have the legal aspect. In the same vein the survey also includes a brief history of the ME and EPP to better understand the context in which these companies have sprung up allowing also to understand how all this reached significance in the world and also in the country. Still on the Micro and Small Enterprises,, the main difficulties encountered in its implementation and survival demonstrating the possibilities to change this unfavorable scenario.
Having addressed all aspects described above on Micro and Small scale research moves on to another key topic of discussion proposed, informality, which has a chapter devoted to this theme which seeks to define and assess their impact on the economy and the lives of workers, followed by another dedicated to exposing the data on informality in Brazil surveyed by the IBGE in 2003. From that point will be addressed Social Function of Company, is the fact that according to this research suggests that, because we will analyze the importance of ME and EPP for the economy as regards the fight against informality.
Finally, a chapter on the final considerations will gather the most relevant aspects of research in an ultimately trying to use all information submitted during the research to achieve the objectives.
A Micro and Small Enterprises
1.1 DEFINITION
Micro-enterprises (ME) and small businesses (EPP) is a very large and heterogeneous, differing according to the sectors of the economy where they operate. Because of this conceptual delimitation becomes often a complicated task, this heterogeneity does not allow the creation of an objective classification, giving rise to different interpretations, and difficulties in defining the business environment in different hierarchical levels. The different areas of business, different need of skilled labor in relation to the productive sector that fall and the volume of production and the different economic levels of countries extend the challenge in defining an efficient and accurate classification companies.
This implies that if employed such classifications, it should be noted the economic sector in which the company develops and the degree of development of society in which it is inserted. A small company in an industrialized country may be average in a developing country, and regarded as a small company in the industrial sector may be average in the trade if we assume only the number of employees for example. (Ignatius, 2005).
According to the ILO, the ME and EPP are:
“Companies, whatever their activity and legal form to adopt, is personally run by its owners, has a small staff, it occupies a dominant position in its industry, does not have high economic resources, the value of its annual turnover and its capital is reduced with respect to the economic sector where it operates, is not directly or indirectly linked to the major financial groups, although it may have relationships with other large companies, non-legally depends on them. “(Ignatius, 2005)
With this definition quoted it appears that there really is some imprecision of classification criteria. Many factors are attributed to different economic levels, different sectors of the economy, and generally identified by comparison with other companies at a higher level, this being evidenced when it determines that these companies do not occupy a dominant position and its capital is reduced in relation to industry that operates.
The difficulties, however, do not hinder efforts to defining ways to classify these companies in a satisfactory manner, through the selection of features common in certain groups seeking to find alternatives to this systematization. One of these alternatives like a better solution of the problem of definition of ME and EPP modes using two different classification based on qualitative and quantitative criteria.
From the qualitative point of view, we have the EPP ME and its management and direction are concentrated in the hands of the entrepreneur. Perform these operations are relatively simple, hence, in general, their own officers exercise a very direct supervision of such operations, thereby making it more personalized relationships with workers. Furthermore, they often carry persons operating functions and control. The smaller the company, the greater the functional differentiation (Dieste, 1997).
As you increase the size of the company and its management becomes more complex, there is necessarily a greater division of labor leading to specialization of functions and therefore to a decentralization of responsibilities.
As can be assumed these criteria are linked to the administrative structure of companies disregarding the volume of production that actually shows a great variation depending on factors like the process of production and income in the region which is, as already mentioned that hinders classification process.
The criteria we can rely on quantitative indicators such as total assets, sales or turnover, gross revenue, the total number of employees, consumption of energy and even the overall number of customers. (Dieste, 1997). The use of quantitative criteria in the classification certainly helps, but as we are on exactly the issue that allows a wide variation and hence an inaccuracy that often leads to unsatisfactory results. Thus, the adoption of quality criteria appears to have an advantage over quantitative criteria which do not prevent the use of the latter in some cases.
In another approach, the definition of micro and small businesses can be made from three aspects: the size, complexity and formalization (Battle, 1989)
The size of a company is defined as production costs, the volume of production and marketing of its fixed assets and working capital, which serves the market value of your income, among other features. In small business, all the elements mentioned above have a small size. The ME and EPP employ few workers, and production levels are low and marketing.
The appearance of the size resembling the use of quantitative aspects, ie, allows the satisfactory in some cases, but in others it may create difficulties, depending on other factors.
The complexity of a company involves its centralization, stratification and technical division of labor. Centralization is the degree of concentration of authority within the company. In small companies, due to the small number of members, usually there is a high concentration of power in their owners. Therefore it is concluded that in small businesses for low stratification, ie, the political division of labor is fairly complex. There are basically small businesses in two categories: toward business owners and their employees in the productive area. The technical division of labor is also greatly simplified. There is little division of labor and the worker with the product since its initial phase of production to the final step (Battle, 1989).
The aspect of complexity is similar to other qualitative criteria of classification, since it is based on the administrative structure, the division of labor, the functions performed within the company. Alone can not be considered sufficient to accurately determine the level at which the company is, but certainly these factors are far more common among small businesses becoming an important tool for classification.
As for the formalization, the company is small, in most cases, informal. Do not have enough definition of its objectives, standards, systems of sanctions and rewards (Battle, 1989). The informality here is limited to those mentioned aspects and not on informality portrayed during the search. This is an aspect weak, it is not something that can be defined precisely as it is not necessarily present in all micro-and also in small businesses.
In short, we can consider the micro and small businesses as small, less complex and relatively informal. So we have a more correct, if the factors alone are not sufficient for this classification, the factors taken together extend the ability to establish criteria for differentiating more satisfying.
Legally the Status of Micro and Small Enterprise and defines microenterprise through the assessment of annual gross revenue, by providing values for the business environment existing in the different classes, such as microenterprise and small business (Montano, 1999).
The law of definition, however, it is questioned, because it favors only the dimensions of the quantity ME and PPE. According to Carlos Monta�o (1999), small businesses should not be considered only from the quantitative point of view but also from the qualitative point of view. From this new perspective, it is observed that the fundamental characteristic of microenterprise is not your annual gross income. Fundamentally, the PPE have ME and low technological development, and therefore is less profitable, less productive. The low annual gross revenue is not, therefore, a definition in itself, but a consequence of the qualitative pattern of the small production company.
Although the classification according to the annual gross revenue is not sufficient to identify whether the company is classified as micro or small business, since as previously mentioned there are aspects most relevant for this purpose, this classification has its importance, because as is officially adopted criteria for the incentives, differentiated tax rates can not be disregarded.
1.2 GENERAL LAW OF MICRO AND SMALL BUSINESS
On November 22 of 2004 passed the House of Representatives Bill of Complementary Law 123/04, which establishes the General Law of Micro and Small Enterprise.
The project was designed by SEBRAE in partnership with governmental and class representations. Intense debates and events of all kinds between business, government and unions prior to the approval of the proposal, which aimed to propose changes that would benefit and reduce the informal microenterprise, creating an environment conducive to the emergence and strengthening of small businesses (SEBRAE , 2002).
The law proposes standardizing legal concepts pervasive in business law and tax; debureaucratize the opening and closure of businesses, facilitate credit, which is one of the major reasons for the high mortality rate of enterprises; facilitate access to market demands of public administration; simplify labor obligations, stimulate innovation and differentiate the record trade and access to justice. The Act also creates the General Forum of Micro and Small Enterprises, with the participation of federal authorities and entities linked to the sector, to formulate and coordinate a national policy for development of micro and small enterprises. (SEBRAE, 2002). Finally, this law aims to facilitate the creation of companies that qualify as micro and small business and allow them to survive, from the differentiation of these companies in administrative, financial and labor, the proposal is to reduce difficulties faced by micro entrepreneurs.
In the chapter on the definition of micro and small business saw that legally, though much criticized, the definition of these companies is done from the quantitative aspects, ie, it takes into account only the annual gross revenue, ignoring the structure administrative or economic sector in which the company is. Thus was defined from the law that microenterprise is one with annual gross revenues of up to $ 240 thousand and one small business with annual gross revenues to $ 2.4 million.
The General Law is related to the creation of the “Special Regime Unified Collection of Taxes and contributions payable by the Micro and Small businesses – Simple National”, nicknamed “Supersimples.” The systematic Supersimples is an optional tax and revenue according to the Statute of Micro and Small Firms – Law No. 9841 of October 5, 1999.
The Federal Constitution of 1988, by prioritizing the protection of fundamental social rights, has proposed an economic order that promotes social justice. To achieve this goal, the Law Magna made use of the principle of formal equality, promoting equal treatment for equal and unequal treatment for unequal. Thus, in his art. 170, IX, the Constitution provides for a “favorable treatment for small businesses constituted under Brazilian laws and having their head quarters in the country.” This favorable treatment is reiterated in art. 179: “The Union, States, Federal District and Municipalities afford micro and small businesses, as defined by law, differentiated legal treatment, seeking to further them through simplification of their administrative duties, social security and creditarias, or the elimination or reduction thereof by means of law “(TEIXEIRA, 2001).
In order to comply with the constitutional provisions, was enacted on October 5, 1999 Law No. 9841, the Statute of Micro and Small Firms. The art. 1 of this Act provides that “pursuant to art. 170 and 179 of the Federal Constitution is provided to micro and small businesses to different legal treatment in the fields and simplified administrative, tax, social security, labor, credit and business development. ” This favored legal treatment, according to the sole paragraph of art mentioned. 1, “aims to facilitate the establishment and operation of micro and small business, to ensure the strengthening of their participation in the economic and social development” (TEIXEIRA, 2001).
To promote micro-enterprise with a different treatment, the statute provides for simplified procedures for compliance with social security and labor legislation. Thus, according to art. 11, the micro and small businesses are exempted from compliance with the arts. 74, 135, � 2, 360, 429 and 628, � 1, of the Consolidation of Labor Laws – CLT. These articles are related respectively to the time frame, noting the granting of leave, submitting documents to the Ministry of Labour, enrollments in Senai and the need for the company owning the book entitled “Inspection of Labour” (TEIXEIRA, 2001).
Otherwise found by the legislature to encourage the micro-enterprise is in relation to credit support. According to art. 14, “the Executive will establish fiscal and financial mechanisms to stimulate private financial institutions in order to maintain specific lines of credit for micro and small businesses.”
The statute also provides for the Partnership Guarantee Company. This company may be formed as a corporation with shareholders participating – only micro and small businesses – investors and shareholders – individuals or companies that make capital contribution to society, with sole purpose of earning income, their participation may not together exceed 49% of capital (SEBRAE, 2009). This society aims to provide security in contracts awarded by participating shareholders, by paying a rate of return for the service, which will facilitate access to credit and the conclusion of business that require collateral.
There are still other concessions in the Statute with respect to business development, warranty forms, among others relating to regulation of micro and small businesses characterized by progressive taxes imposed on sales of businesses. There are nine unified tax: six federal (income tax, IPI, social contribution, PIS / Pasep, Cofins and employer INSS), a state (ICMS), a municipal (ISS) and contributions to the private social service and vocational training linked to union system (SEBRAE, 2002). Thus, complex concepts as revenues, expenses, income, net income, debts, credits, value added and payroll will be replaced by mathematical tables of progressive taxes imposed on sales.
The “Supersimples” is also forbidden to companies that perform specific activities. Thus, the micro and small businesses that represent foreign entities, which have subsidiaries in other countries or even have establishments in more than one State can not join the new tax system. Also excluded are companies on how to set up a corporation publicly traded and the activity engaged in commercial banking, investment and development and credit.
The bill also limits participation in the “Supersimples” of companies that provide communication service (except the external media, the newspaper, broadcasting and audible sounds and images) that perform transportation services intermunicipal or interstate, they are generating, transmitting or distributing energy, manufacturing, importing, rent or sell cars, motorcycles and fuels (except gas stations) that sell alcoholic beverages, cigarettes and weapons, providing surveillance services, cleaning or maintenance (SEBRAE, 2002).
It appears that the law despite using criteria not as efficient frameworks for micro and small businesses to address issues important to facilitate the creation and survival of these companies. The relaxation of some labor laws, bureaucracy, the use of different tax rates for these companies are considered important points to encourage ME and EPP in that country. Thus the law promotes alternatives to reduce the mortality of companies and allow new companies emerge, point in favor with regard to combating informality defended here.
1.3 HISTORY OF MICRO AND SMALL ENTERPRISES
From the Industrial Revolution, man lived in a constant change in their working relationships. The craftsmanship developed in the craft guilds were replaced by work in the factories bourgeois proletariat. The new working class, however, was heavily exploited by comprehensive working hours, low wages and lack of rights projective as holidays, weekly rest, among others. Such a situation could not be accepted without question. There were thus different ideologies proletariat against bourgeois domination, such as Marxism and anarchism. These doctrines have major repercussions around the world, causing riots and revolutions and establishing a climate of instability in labor relations (Battle 1989).
To avoid the collapse of capitalism and its replacement by the socialist mode of production, the state gives way to the Liberal Welfare State or Welfare State. This type of rule was implemented in order to contain some riots, offering guarantees to the population in the areas of health, education and housing. In this period there was a large production of labor legislation, ensuring the employee annual leave, the 13 th salary, a working day reduced to eight hours a day, among other rights (Battle 1989).
However, the laws greatly increased labor costs of production. Keep an employed worker has cost too much to the capitalist, and the output seemed to be more feasible to reduce the number of salaried employees, consequently decreasing the burden of social engagement.
Thus arose a new kind of working relationship: subcontracting or outsourcing. By this artifice the capitalist, in dismissing their employees, offering them an offer to buy your surplus machinery due to the decreasing number of workers. Such deals usually cost feasible to purchase the now unemployed workers, the employees seemed to salvation against unemployment. Thus, the worker becomes the owner of his own means of production. The new small business therefore continues to produce the same goods produced while employed, but now in a “standalone”. The business owner makes and sells the goods produced by capitalism, which serve as raw material for the latter (PALERMO, 2002).
It is established, then, to the great capitalist a new type of plant: the plant “minimal” model in which the largest amount of raw material is produced outside the industry. For each business, however, there remains the interface operation. This production is replaced by a highly specialized and focused on the interest of the industry. If nothing else, the social costs once very costly for the capitalist, are all transferred to the small business. It is he who must bear the costs of pension, accident insurance, among other labor guarantees; for former employees of the big capitalists and now distributed in small businesses (Battle, 1989).It is established, then, to the great capitalist a new type of plant: the plant “minimal” model in which the largest amount of raw material is produced outside the industry. For each business, however, there remains the interface operation. This production is replaced by a highly specialized and focused on the interest of the industry. If nothing else, the social costs once very costly for the capitalist, are all transferred to the small business. It is he who must bear the costs of pension, accident insurance, among other labor guarantees; for former employees of the big capitalists and now distributed in small businesses (Battle, 1989).
There is also another important factor in the emergence of micro-enterprise: the increasing automation of large companies. This development has caused the so-called technological unemployment, resulting from replacement of men by machines. This substitution has launched many workers to informal (PALERMO, 2002)
This brief history allows us to understand that the emergence of ME and EPP occurred during the development of capitalism and its changes due to the factors cited provided a favorable ground for the development of this category of companies over the years, gaining more importance to the economies of countries and also in the lives of workers. Even today, if not only, excluding employees of large companies that allow these seek to be masters of their workforce through the creation of micro enterprises, and even today, despite the initiatives that have been described in the chapter on General Law ME and the EPP, these suffer from the burden, making the survival and growth of their business.
1.4 Main difficulties faced
Although recognized as the Micro and Small Businesses have a key role in the economic and social development of the country and are identified as an efficient alternative to combat informality, these companies find it very difficult to implement and especially for their survival. Be the huge bureaucracy to open up and even closing a business, either by raising taxes absurdly high costs, for example, of hiring staff or simply lack the necessary expertise and care as market research and responsible management and lean inventory, the entrepreneur ends up being influenced not to “venture” in the creation of his company after all and when it does, often does not succeed and was forced to close early and interrupting the dream of owning your own business .
Information obtained through access to the internet address of the SEBRAE – Support Micro and Small Enterprise allowed to know the mortality rate among companies of the State of S�o Paulo, as well as the elements that contribute to the closure or survival of these companies. Although the numbers are limited to this state are sufficient to illustrate the difficulties faced by micro entrepreneurs, it is the most populous state and the country’s richest and thus has great relevance in the matter being able to meet the needs of the research. In a future time will be shown various information regarding ME and EPP in the chapter for the informality in Brazil, but as these data are related to mortality rate, become very relevant to illustrate the difficulties of ME and EPP.
The mortality rate for companies with a year of activity is 35% in the first year, 46% in the second year and 56% in the third year. On average, after three years of operation, 44% of companies still in business (SEBRAESP, 2009).
Apparently, trading companies are those that have a higher propensity to mortality. About 39% closed before completing its first year of activity, while the mortality rate in the industry in the first year of activity falls to 32% of companies in the service sector and the mortality reaches 30% of companies in the first year (SEBRAESP, 2009) .
The first factor that affects the success or failure of a project concerns the realization of some planning before the opening of business, a factor linked to the existence of previous experience in the business of the entrepreneur. The planning activities most commonly used are the assessment of qualification of labor, information on the legal aspects of business, prior identification of suppliers, information on the cost structure of business and product information and / or services competition. Although few cited concern about the volume of sales necessary and with the clientele are factors that directly affect the chances of success of a company (SCARANELO, 2007).
The way of acting is very significant for the determination of results of an enterprise. The improvement of products and services as customers is most common factor in companies that persist in the activity.
Another factor to consider is the dedication to the company. It is necessary for the entrepreneur to operate directly in your business, since he is most interested in its fruits, and seek specific knowledge about their area of ??expertise. It should also fulfill their obligations on time, without accumulating debt.
Most companies that succeed and seek to invest in advertising acessoria professionals and institutions to assist them in managing their businesses.
Among the surviving companies, the major difficulty is the economic difficulties, while among those that are usually closed due to lack of working capital. Noteworthy is the fact that the tax burden to be a problem common to all types of businesses. The reasons leading to the closing company are linked to lack of demand, problems with partners and personal problems. So diverse are the factors determining the success or failure of an enterprise (SCARANELO, 2007).
As a result the situation of micro and small enterprises, have additions or reduction of job opportunities. It should be emphasized that we are not just dealing with numbers, but with the possibility of improving the human condition, allowing them a dignified existence.
Crime is an indicator of high mortality of small and micro enterprises. By encouraging them, it creates opportunities for young people and teenagers who have no perspective on life, fighting crime.
The informality and mortality of micro and small businesses reduce tax revenue. Yet, greater state action is necessary to encourage microenterprise, aiming to raise production, consumption and employability in the country.
As seen from the ME and EPP are still obstacles incompatible with his own importance both for the country. The high mortality rate among companies has defiantly demanding the search for alternatives to allow them to survive and exercise their fundamental role in the economy and society of the country.
2 Informality
The informal economy as early as the beginning of the study may represent different phenomena, ranging from outright tax evasion activities up mere survival of marginalized populations in the labor market, and for this discussion held here this last is more relevant .
This reality has been defined historically determined and classified from two distinct sets of activities: a ) the formal sector, whose functioning activities were defined as barriers to entry, with external resources, impersonal property system, operating in markets large and protected by quotas and tariffs, large-scale production processes of modern technology and capital intensive and skilled labor, and b ) the informal sector, defined by the absence of entry barriers, provision of resources for domestic, individual property operating on a small scale, labor-intensive production processes, operating in competitive markets and unregulated (Miziara MUSSI, 2000).
Within the orbit of informal and survival area of ??surplus manpower, this question has often seen as a kind of “buffer” that it would work to absorb the manpower savings for the Unemployed downturns in the formal, or have the function of taking the population of workers who are outside the formal economy.
Additionally, the informal sector have functionality to the capitalist sector itself, because it would lower the “cost of labor to produce at lower prices items in the basket the worker” and would meet “the demand for goods and services in sectors unattractive in terms of profitability for capital “(Pero, 1995). According Cacciamali (1983) the informal sector is composed of agents that act outside the regulations of the State: means in relation to firms, in general, tax evasion in its various aspects (information relating to revenue, purchases of materials, hiring employees etc.). towards employees, means activity outside the norms of labor legislation, as well as clandestine activities. This definition touches on different reality as regards the choice of workers for this type of participation. Pero and Urani (1994) estimate the differentials between employees with and without a formal controlled by educational level, age and metropolitan area, and verify that employees with a formal (formal) gain relatively more.
The understanding of what the informal sector is hampered by a variety of interpretations. One of these interpretations considers the self-employed and workers who produce on a small scale, without access to credit is almost nonexistent and the separation between capital and labor as factors of production. These units use obsolete production techniques, no matter where you develop the productive activity, the use of fixed assets or its duration, ie, whether permanent, seasonal or occasional. The fact that these productive units whether or not records will not serve as criteria for defining informal, because what matters is the organization and functioning of the economic unit and not the status legal (Miziara MUSSI, 2000).
This definition was adopted by the IBGE for his research on the urban informal economy, defining the informal sector belonging to all economic units owned by own-account workers and employers with up to five employees regardless of the number of owners or unpaid workers, residents urban areas, whether the main activity of its owners or secondary activities (Miziara MUSSI, 2000). Following this line of thought, the informal sector would be characterized by non-clear distinction between ownership of the means of production and possession of the labor force. Therefore, the direct producer brings together the figures of the same employer and employee including the possibility of employing family members and / or helpers (including signing the formal contract) and when participating in the produce and making the run. In this case, your income is subject to market goods and services, not to the labor market. Consequently, this sector includes simple commodity production, which does not follow the logic of capitalist accumulation process or the competitive rate of return, but the maximization of the total income stream generated by the activity, so that allows the unchanged reproduction of the producer and his family, and, secondly, the continuation of the activity (Cacciamali, 1983). This sector would include, then, the self-employed and small businesses, family or not.
Informality in Brazil 3
The Urban Informal Economy Research ECINF-2003, conducted by IBGE in partnership with SEBRAE, which also brings information about the characteristics and financial aspects of projects, and indicators of access to formal credit, and evaluating performance and prospects, provides data important to illustrate Informality in Brazil. The picture is certainly very worrying, since according to the figures provided in 2003 there were more than 10 million businesses in the informal sector, occupying a quarter of workers in the country. It is also important to state that all numbers that are shown here deal with the urban informality, or refer to non-agricultural small businesses.
In October 2003, in Brazil there were 10,525,954, of which 98%, or 10,335,962 belonged to the informal sector and employed 13,860,868 people. In the previous survey in 1997, grew 10% in the number of small businesses, while the number of enterprises in the informal sector grew by 9%. The increase in employment in informal enterprises was about 8% over the same period. Among the units of the federation, Sao Paulo, Minas Gerais, Rio de Janeiro, Bahia and Rio Grande do Sul concentrated together, 57.6% of informal sector enterprises throughout the country (IBGE, 2009).
Table 1. Number of non-agricultural businesses with up to five employees of the informal sector – Brazil
| Number of firms | 1997 | 2003 | Growth (%) |
| Total | 9580840 | 10525954 | 9.9 |
| Informal sector enterprises | 9477973 | 10335962 | 9.1 |
| Busy people | 1997 | 2003 | Growth (%) |
| Informal sector enterprises | 12870421 | 13860868 | 7.7 |
Source: IBGE, Directorate of Research, Department of Work and Income, Urban Informal Economy Survey, available at: http://www.ibge.gov.br/home/estatistica/economia/ecinf/2003/default.shtm
Table 1 shows an increase of 7.7% in the number of employed persons working in informal sector enterprises between 1997 and 2003, whereas companies with up to five employees. In the same period increased the total number of companies as well as the number of informal sector enterprises (9.9% and 9.1% respectively) so that the growth of informal sector enterprises was somewhat lower than the total growth that could indicate a small decrease in informality, however, because it is such a small difference between the percentages of growth, the large number of informal enterprises and increasing the number of employed persons in informal sector enterprises, the situation can still be considered alarming.
Among the persons employed in informal sector enterprises, 69% were own-account workers, employers 10%, 10% of employees without a formal contract, 6% registered workers and 5% are unpaid. These proportions have changed little over 1997. In most categories predominated among males (64% of total employees), except unpaid, where 64% were women – which accounted for 3% of the employed population (IBGE, 2009).
It is through the numbers and the graph that the majority of employed people is presented as self-employed, the other categories (employers, employees without a contract, formal workers and unpaid) would be connected to or Micro Business Small businesses that do not comply with all legal requirements and therefore qualify as informal, still representing a very small number when compared with the total number of persons employed in the informal sector.
The predominant economic activities in the informal sector in 2003 were trade and repair (33%), followed by Construction (17%) and Manufacturing Industry and Quarrying (16%). Of all small businesses related to construction, 99.8% were informal. The second largest proportion of informal businesses was identified between the Collective, Social and Personal: the universe of small companies linked to these activities, 99.3% were informal. On the other hand, the Real Estate, Renting and business services had a higher share of formal firms (4.3%) (IBGE, 2009).
Table 2. Informal sector enterprises according to the activity groups in Brazil, 2003
| Total | 10335962 |
| Manufacturing industry and extractive | 1630580 |
| Building | 1808840 |
| Trade and repair | 3403804 |
| Accommodation and food services | 719 107 |
| Transportation, Storage and Communications | 831 421 |
| Real estate, renting and business services | 655 467 |
| Education, health and social services | 341 135 |
| Other community, social and personal | 823 751 |
| Other activities | 34,036 |
| Ill-defined activities | 87,821 |
Source: Adapted from IBGE, Directorate of Research, Department of Work and Income, Urban Informal Economy Survey, available at: http://www.ibge.gov.br/home/estatistica/economia/ecinf/2003/default.shtm
Also according to the research on the urban informal economy in 2003 conducted by the IBGE, more than half of informal enterprises do not make any type of bookkeeping. The proportion of informal businesses without accounting increased. In 2003, 53% did not do any type of bookkeeping, and 36% of them, the owners performed this function without the help of an accountant, while in 1997 these proportions were 46% and 39% respectively. Enterprises of employers used more accounting services and only 21% did not record anything. Among the companies own-account workers, this percentage was much higher: 57% did not record anything (IBGE, 2009).
Of all enterprises in the informal sector, 88% had no legal constitution, which corresponded to 93% of companies own 56% of companies and employers. Among those who had legal constitution, 93% had monthly income greater than $ 2,000.00, while 72% of those who did not have that record received on average to $ 1,000.00. On average, 74% of companies surveyed had no municipal license or state standard that varied according to the activity. Approximately 90% had no record of microenterprises, a proportion that changed little between the various groups of activities. Few companies (2%) had adhered to the system of taxation SIMPLE by the end of 2003, mostly in trade and repair (53%). Owners of companies with their own, 79% said they were not regulated, and among those of small employers, the proportion was much lower (34%) (IBGE, 2009).
Table 3. Proportion of enterprises in the informal sector to total business, by type, according to indicators of formalization in Brazil, 2003
| Indicators of formalizations | Proportion of enterprises in the informal sector in relation to the total number of companies, by company type (%) | ||
| Total | Own | Employer | |
| Had any record of micro | 10 | 6 | 38 |
| Joined al SIMPLE system | 2 | A | 9 |
| Owned municipal license | 23 | 19 | 52 |
| He was affiliated with union | 11 | 8 | 28 |
| Had legal constitution | 12 | 7 | 44 |
Source: IBGE, Directorate of Research, Department of Work and Income, Urban Informal Economy Survey, available at: http://www.ibge.gov.br/home/estatistica/economia/ecinf/2003/default.shtm
It is to note the previous table that said indicators of formalization is more prevalent among employers, ie, this code encounters the idea that the Micro and Small Businesses have an important role in combating informality and as such needs being increasingly promoted.
Following the data comparing 1997 and 2003 still according to research conducted by IBGE informal economy, it appears that the proportion of formal enterprises profitable drops significantly in this period.
In 1997, 93% of informal sector enterprises were profitable. This proportion fell to 73% in 2003. The following table shows that during the period, significant drop in the average real income of the enterprises of their own, while employers maintained profit at the same level before. Among profitable firms, most of them, 36% were trade and repair sector. It should be noted also that the average revenue obtained by enterprises of employers (R $ 6,033.00) was five times that obtained by the companies themselves (R $ 1,164.00). The vast majority of informal sector enterprises (94%) did not use credit in the three months prior to the development of research activity. Among those that did, the main source of funding was public or private banks (to 58% of companies), followed by the actual supplier (16%) and relatives or friends (16%). In November 2003, and in 1997, 83% of informal sector enterprises did not have any debt (IBGE, 2009).
Table 4. Financial results by type of company in the informal sector in Brazil, 1997/2003
| Financial Results | ||||||
| Total | Own | Employer | Total | Own | Employer | |
| Average Monthly Revenue | 2183 | 7446 | 6622 | 1754 | 1164 | 6033 |
| Average monthly expenditure | 1666 | 1001 | 4647 | 1362 | 813 | 4312 |
| Average profit | 977 | 760 | 2351 | 911 | 671 | 2360 |
| Investment | 5853 | 4493 | 6602 | 4373 | 2951 | 8797 |
Source: IBGE, Directorate of Research, Department of Work and Income, Urban Informal Economy Survey, available at: http://www.ibge.gov.br/home/estatistica/economia/ecinf/2003/default.shtm
From the above data on the situation of informality, and all the problems mentioned in the course of this research, it is concluded that the situation becomes more serious if it is found that the financial results are becoming increasingly unfavorable, ie, these companies are increasingly leaving to take profits.
As to the operation of enterprises, the IBGE survey reported that 65% developed their productive activity outside the home only, 27%, exclusively in the home owner’s and 8%, the home owner’s and beyond, a result influenced by the weight of such activities trade and construction. Among the companies belonging to self-employed, only 63% worked outside the home of its owner, while among those belonging to small employers, that proportion reached 79%. Approximately 89% of companies surveyed worked all months of the year, mostly for self-employed. Only 7% of informal sector enterprises were seasonal behavior. It should be noted that among the companies in the area of education, health and social services, 23% had seasonal behavior. About 70% of the production units used equipment and / or own facilities, highlighting the use of tools or work tools. For 1997, growth was noted in the proportion of productive units that used buildings, tents or trailers . (IBGE, 2009)
In 2003, the states of S�o Paulo, Minas Gerais, Rio de Janeiro, Bahia and Rio Grande do Sul concentrated 57.6% of informal sector enterprises and 56.8% of small businesses surveyed. The proportion of persons employed in these five units of the federation representing 56.4% of the 13.9 million workers in the informal sector. Sao Paulo alone, concentrated 25% or 2,581,820 informal enterprises, followed by Minas Gerais, with 10.3% or 1,049,774 companies, and Rio de Janeiro, with 8.4% or 863,435 informal enterprises. Participation in the informal sector among small businesses was more evident in both the Holy Spirit and in Acre, states where 99.45% were informal. Have Mato Grosso had the highest proportion of companies formalized (3.97% of total). Of its 141,133 non-farm small businesses, were formalized in 5610. (IBGE, 2009)
4 Role of Social Enterprise
One can say without doubt that it is legitimate self-interest of the entrepreneur to reap the profits when their activity that does not prejudice the interests of the community and also seeks to ensure the dignity of future generations.
The function of the company, it is noteworthy, not merely the exercise of entrepreneurial activity, on the contrary, it is linked to the pursuit of sustainable development. According Comparato 1990:
“The company is to meet not only the interests of members, but also the community, and that function, right, is a power to act on the legal position of others, in the interests of others, never in favor of the proprietor. Some often interested in exercising people are indeterminate and therefore not legitimate to pursue claims against the personal and exclusive holder of power. these assumptions is precisely that one should speak in social function or conference. (…) in the case of capital goods, power and duty of the owner to give the thing a disposal compatible with the interests of the community transforms itself, when such goods are incorporated into an operating business in power and duty-holder’s direct control company for the realization of collective interests. “
From the above analysis to date, it was possible to conclude that a company should be aware of its social function, and not only for their own capitalistic interest, fulfilling the social function called, this idea is even stronger when it comes to micro and small businesses.
You can verify that the social function is an attribute inherent in micro and small businesses, given the specifics of the segment and the social character of their activities, especially when one takes into account the municipality or region that have their headquarters.
However, the economic policy adopted today, much more focused on macroeconomics (SON CAPEL, 2004), suppresses the micro and small businesses that, given the huge competition with large companies, have no solution other than the closure of its activities .
Thus acting in accordance with Gaede (2004), the State meets with his administrative role to promote the development, which should be better observed, considering that is a fundamental objective of the Federative Republic of Brazil:
“(…) The government has been basing for a macroeconomic agenda that prioritizes issues related to fiscal and monetary policies. These measures are necessary to resume growth, but are not the only determining factors for the resumption of long-term growth “. (Gaede, 2004)
The state, by failing to promote microenterprise and small business, let the happiness of the economy and competition from conglomerates disproportionate – not to mention the greed of the Treasury, contributing to the failure of the segment and therefore not complying with the dictates of social justice, mandatory compliance by a Democratic State in the defense of fundamental rights of citizens.
The micro-economic characteristics as a manifestation of the less favored economic classes, acquires unique importance in the current economic scenario, so that by strengthening the segment, it would be reaching the actual socio-economic development.
Hence the importance of the major duty segment, the development of less developed regions, especially when you consider that micro and small businesses are the target of thousands of graduates and others who flock to view the segment by a greater availability of wealth and opportunity to develop your own business. (Quandt, 2004)
For all these reasons, it is reasonable to conclude that the encouragement of micro and small business is one, if not the biggest determining factors of the development process, with an eminently striking effect in the process of socio-economic development region.
Still, the large number of micro and small businesses is directly related to development. The concentration of ME and EPP have a reason, namely to serve as a parameter to assess the social and economic development of a community, there should be so cogent, an environment, not only of growth, as also for development of micro and small businesses (Spinola, 2003).
It is worth mentioning also that the micro and small businesses are that they are tools of free enterprise and democracy. Any citizen, since in a socio-economic environment, you can create your micro and work for their livelihood.
Therefore, for all that is necessary to maintain, effectively, a differential treatment for small businesses, aiming not only to enable him to compete in the market, but also to ensure the socio-economic regional meeting, thus the best possible way, the “Social Justice”, besides, be a right and a fundamental guarantee of the small business owner, limiting thus the performance of State Power.
As already mentioned the economic policy adopted is not favorable to the ME and EPP, despite the exposure of some major initiatives in the chapter on the General Law of Micro and Small Firms. This concern is reflected in economic policy is to some extent justified because large companies are able to provide greater economic openness to the government. However, we must not forget that, while not contributing much to the public coffers, the ME and EPP promote more decentralized and equitable development in less developed regions. Therefore, we conclude that the ME and EPP are a parameter to assess the social and economic development of a community, further emphasizing its role in the economy, a fact that must be observed by the State in implementing its policies.
The current legal treatment accorded to different ME and EPP are not able to change the reality of the segment.
The ME and EPP live in a world of its own, where the micro and small have the need to intervene in the production process with its own workforce.
This fact, when faced with the current economic climate and voracious, is a negative factor for the micro and small businesses, in addition to, contributes to the formation of an entrepreneurial culture in Brazil flatly inconsistent with the huge range of taxes and existing laws today, which requires a constant update and study by microentrepreneurs.
Investing in micro and small business is to generate the distribution of wealth, provide jobs, improve the quality of life of the regions that are home. Finally, support the segment is more clearly a Democratic State to fulfill its social function.
Final Thoughts
It was possible to check with the survey that the Micro and Small Enterprises have fundamental importance for the country. These companies play a major role in the Brazilian economy, accounting for various jobs and significant percentages of the tax revenue.
We, however, that the difficulties in the creation of these companies are still great and even greater when we refer to survival, since mortality rates of companies in a few years are still very expressive. Difficulties of all kinds, from the bureaucracy that often obstructs the creation of businesses and even its closure, passing the high tax rate, harshness of the labor laws in many cases for micro-entrepreneurs to the lack of preparation and orientation of entrepreneurs , configure a challenging scenario for the pretensions of those who see in the ME and EPP ally to combat informality.
The informality that often in the research was presented as extremely harmful to both the economy and for the welfare of workers, does not generate revenue, not guaranteed to workers and that unfortunately is all over the country in an alarming and hardly fought.
This table illustrates perfectly our objective, where demonstrated the potential of ME and EPP to combat informality. For this treatment to these companies should be well differentiated, a lower tax rate can generate a greater number of collections, the bureaucracy of the process of starting a business can serve as a stimulus to increase the number of existing companies, the orientation of the entrepreneurs can do that these better manage their business, in short, these are alternatives to minimize the difficulties for the ME and EPP and reduce the harmful effects of informality.
Some situations expressed demonstrate that there are actions that effect, as the law of specific ME and EPP, as the work of SEBRAE, but more is needed, the support must be why the importance is very great.
Finally, research has shown how harmful is the informality, its negative aspects to the economy and society, and also showed how the ME and EPP are of fundamental importance in combating measures are taken and need to be intensified, because the damage of informality and importance of Micro and Small Enterprises are decisive factors for the economy and to the Brazilian society.
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