Gem buying in Teófilo Otoni and the Caixa Dois (the second till), or how it is normal for businesses to run a bit illegally in Brazil

Caixa Dois -- the other cash register

Wow! Whoa! This topic is so large that several books could be written on it. I wonder if accounting majors cover this topic at Brazilian universities. If they don't, they should, because all Brazilian accountants must know how this thing works in order to be able to do their job properly, which is to help their clients maintain the caixa dois.

On the most basic level, caixa dois is the means by which sales and purchases are kept off the official books of a company in order to avoid taxes. There are other things that can be kept off the books in order to avoid taxes, for example, employees (that saves any business an absolute ton of money) and assets (Brazilian politicians love this one).

Let me just start off by stating that the Brazilian internal revenue service (called the Receita Federal) is fully aware that probably 90% of businesses do not have everything on their official books. As long as the business owner does not go overboard or so long as they can grease the right palms adequately, they will not get in trouble.

This begs the question: "Is any business done completely legally and above board in Brazil?"

For an answer to this, please ask any Brazilian and watch how long it takes them to come up with an answer.

Sure, on a daily activities level, you can go to a store and buy groceries or to a shoe store and buy shoes -- those sorts of things are pretty normal. At least as far as the consumer goes. It is the back room operations that are murky.

And, you can open a bank account and have your salary deposited there and even have all your bills paid automatically, if you want.

However, you had better keep a close eye on your balance. Just offhand, I can name three people I know who have had their accounts cleared out -- all inside jobs. They all got their money back, but it sure messes up your life while you wait.

What does all this have to do with going to Teófilo Otoni to buy gems? Just let your mind voar ("fly around," as they say here) on that one.

First, most all the sellers love for transactions to occur off the books. Some of them do not even have books in the first place because they have never set up a business entity.

Second, what about you, the buyer? Are you going to declare the value of all those gorgeous stones at Customs when you get back to the U.S.? Well, are you?

Let's assume that you are as honest as the day is long and that you will declare the stones upon your arrival back home.

You're going to need a receipt.

Here in Brazil, there are two types of receipts: that flimsy one on the smaller pads usually with a piece of carbon paper in between the original and the copy, and the other kind, the official kind that is recognized by the state government tax authorities of whichever Brazilian state you happen to be in, and it may come in up to five copies. It is called a nota fiscal.

That flimsy one? That is for the caixa dois. But you know what? The U.S. Customs Service couldn't care less about a Brazilian business trying to avoid paying Brazilian taxes -- what they care about is you not cheating on your U.S. taxes.

Let's go back to the non-official receipt. You can probably have the seller fill it out any way you want. That is going to be up to your own level of honesty or ability to self-righteously deceive yourself that you already pay enough taxes and why should you pay more and it cost a lot to come on the trip in the first place and you'll never be able to afford that stone that you just gotta have if you also have to cough up at Customs, etc.

Pay attention here! If you want a receipt, don't forget to ask for one!

For most gem transactions, if you forget to ask the seller for a receipt, he/she will not bring it up, unless they are a very large reputable firm who pays most of their taxes (in which case, chances are, you are going to be paying through the nose for whatever it is you are buying).

But even in the case of the official receipt (nota fiscal), things may not need to be entirely kosher.

To be continued . . .

Update -- I will write a Part II to this post as a separate post, and then I will put the link here.

Copyright © 2009 N. Tenney Naumer -- All rights reserved.