Investor Presentaiton

61 JAN FEB MAR 2009 Report DYNAMO Attributes Since 2003, the World Bank has annually updated its Doing Business publication, an attempt to measure the quality of the global business environment. The countries in question are ranked according to microeconomic factors, such as: starting a business, dealing with construction permits, employing workers, registering property, getting credit, protect- ing investors, paying taxes, trading across borders, enforcing contracts, and closing a business. In the 2009 edition, Brazil was demoted to position 125 out of 181, placed uncomfortably below Bhutan (124th) and above Micronesia (126th). Our worst performance was identified under "paying taxes" where Brazil ranked in 145th place. This item consists of three indicators, one of which is a proxy for the size of the tax burden and another two that seek to measure the complexity of the administrative processes required to comply with tax liabilities. In one of these items measuring the number of hours per year required to prepare, file returns and pay taxes, Brazil came last in the global ranking having a attained a record number of 2.6 thousand hours, miles away from Cameroon, which came in second to last at 1.4 thousand hours. Brazil today boasts an arsenal no less than 85 taxes, named in many different ways². The cost of our tax bureaucracy is prohibitive. Its impact on the private sector is already very well know: distorts the structure of production and employment, provides incentives for tax evasion and illegality, reinforcing the competitive disadvantage for law-abiding companies. What is less known is the fact that the Government itself has begun to feel the perverse impact of its complex tax system. Accordingly, in 2003, a constitutional amendment established that Fiscal Offices should have access to "priority funds" to act in an "integrated manner" in order to "share filings and tax data". This led to a number of initiatives among the Federal, 1 2 www.doingbusiness.org Tribute in Portuguese is used as synonymous with tax. The full of Brazilian taxes list can be found in http://www.portaltributario.com.br/tributos.htm. 3 Article 1 of Constitutional Amendment No. 42, approved on December 19, 2003, introducing sub-item XXII of Article 37 of the Brazilian Constitution. State, and Municipal Departments of Treasure. Chief among these was the increased use of ST (tax substitution), the PMATA (Tax and Customs Administration Modernization Project), and Technical Cooperation Protocols, which led to the formation, and commitment to development and implementation, of SPED (Public Digital Bookkeeping System). Under Brazilian tax substitution system, the obligation for paying a given tax is transferred to a third party taxpayer. Thus, multi-stage taxes (due more than one time along the supply chain) become VAT (value added, one-time tax), thereby sim- plifying the tax payment system by concentrating the respective liability on a single party. SPED, which was introduced by presidential decree, is a tool whereby fiscal and accounting forms are converted compulsorily into digital format. The aim of this system, which comprises three main sub-projects (accounting bookkeeping, Note: Our Performance As from this quarter, Dynamo Reports will no longer include the Our Performance section. At the close of each quarter, our investors will receive together with their state- ments of accounts, our comments on performance for that period. The Reports will continue to have the main text, covering current topics in the world of investments, finance, markets, business, and companies. We plan to carry on producing four Reports per year, which may eventually come to be delivered over differing periods of time. With that, we intent to maintain the same standards and style of analyses, without undermining the up-to-date nature of the comments previously given in Our Performance, as has recently been the case

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