Cisco Offices Raided, Execs Arrested In Brazil

Many readers are writing in about the raids and arrests in Brazil's Cisco operation. At least 40 people were arrested earlier today, and Brazilian authorities asked the US to issue arrest warrants for five more suspects in this country. The allegation is that Cisco brought at least $500M of equipment into Brazil without properly paying import duties, and now owes over $826M in taxes, fines, and interest.

brazil is insane

[Lord Ender]

Sending them a tax bill seems a bit more sensible than arresting every janitor and secretary in the office. Is Brazil trying to frighten away foreign investment?

Re:brazil is insane

[ObsessiveMathsFreak]

Is Brazil trying to frighten away foreign investment?

Hear, hear! I mean Corporate Executives being arrested! Some of these men have played gold with Very Important People?

Who do these Brazilians think they are anyway? Some kind of sovereign nation?

Re:In related news...

[kithrup]

$826 million in taxes, fines, and interest. Tax evasion (or avoision, as Kent Brockman likes to say) results in fines in addition to the taxes that are owed. And then every day they don't pay the taxes and fines, they get interest added. And that compounds.

The United States has done similar things. For larger amounts. Usually, it gets settled out of court for a fine; I don't know Brazilian courts, but I still suspect that'll happen here.

Pretty hefty tax rate...

[Anonymous Coward]

$500 million worth of telecommunications and network equipment, $826.4 million in taxes?

That's a 165% tax rate!

Re:Pretty hefty tax rate...

[LBArrettAnderson]

Well, that figure includes fines and stuff... the actual tax rate is probably closer to 100%.

For some odd reason, latin american countries charge a ridiculous amount of tax on electronics. In the Dominican Republic you can expect to pay double or triple the normal price for any and all imported electronics. I tried to have a $300 camera sent to me via DHL, and they wanted $400 to pick it up from customs (13000 pesos).

I call that the opposite of progress... unfortunately many governments can't see beyond "now." "Oh hey... we can just charge a ridiculous amount of money on imports and make money!!! we win!"...... (I understand the tarrifs to help local businesses... but honestly... there aren't any camera manufacturers in any of those countries).

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:In other news

[1u3hr]

Huawei expands operations in Brazil, hundreds of jobs created. (Well, not hundreds, but probably as many as Cisco had.)

In the end...

[Merovign]

This will probably turn into a pretty rapid-fire he-said she-said involving bribes, corruption, and really bad moves.

The high tarrifs, bribes, and corrupt officials make this kind of thing inevitable, but it was still stupid to try to get around the taxes. Understandable, in the sense of closing your fruit stall during the shift of the corrupt cop who collects protection money, but still stupid.

The problem is that, like India, the Brazil market is big enough for people to take risks to sell there.

We'll have to see how it turns out, but I'd place a small bet that the local Cisco office bribed the wrong official - who either turned on them or done got themselves busted.

That's why a (relatively) honest system is so important - certainty.

Re:Worse than ignorance, it's iggerunt.

[teh moges]

When I read the above comments the first time, I assumed they were jokes at the fact that it was Cisco that was being fined (and in an act of revenge they stop their routers from working, which presumably run most of the Internet). I never thought it was a joke at Brazil's expense.

Then I read your comment, then read the above comments again. Nope, still a Cisco reference

Re:Worse than ignorance, it's iggerunt.

[danbert8]

4) It is not correct to call Brazil part of "Latin America". Brazilians are part of a very different culture than the Spanish-speaking countries. (Brazilians speak Portuguese.)

Portuguese or Spanish, it matters not. Both are Romance languages (derived from Latin) so it is still correct to refer to it as part of Latin America.

8) The Brazilian government is far from perfect, but is much less corrupt than the U.S. government. How many Iraqi civilians has the president of each country killed? George W. Bush: 1,000,000. Lula: 0. How many countries has each country invaded or bombed for oil or weapons or other profits since the end of the 2nd World War: United States: 24. Brazil: 0.

Yes, the US has had many armed conflicts since WWII, but so has every other country. Be it a war of aggression, a war of defense, a war of independence, or a war just for the hell of it, there is some sort of profit in it. You cannot judge a country by how many wars or how many kills, but the motives behind them. And yes, you can claim that the wars were for weapons or oil all you want, but that is an opinion, not a fact.
 
Actually, the only points you made that are relevant to this discussion are 1-3 and that's a stretch as it is. All the rest of these are utter nonsense.

Re:Would have gotten away with it too if it weren'

[kmac06]

I think $826,000,000 will affect anyone's bottom line. Of course who knows what they'll actually end up paying...

Re:In related news...

[superwiz]

Says Brazil. Aaah.... You know it's so rare an occasion when the moral of Atlas Shrugged is so apropos that I generally have to dismiss Objectivism as a workable philosophy of life. But here it actually works. If Cisco has any balls, they'll simply withdraw from Brazil. Never ship any routers there again. Since their routers are so good they are essentially the only ones usable, that will, in fact, push Brazil into 20th century. This is one of those rare examples when the Atlas can shrug with impunity. Yeah, yeah, I know there are other solutions, but their overall cost is so much more than Cisco that no one even bothers. I do hope Slashdot keeps following this story. Because more likely than not, the Brazil will blink in this one.

Re:Brazil import laws

[dbIII]

They have the strictest of import laws, but their system is damn corrupt.

You get this wherever there is a bit of corruption. On one side if you have people that want to stamp it out they have to be strict. On the other side if you have people that want to increase the amount of corruption they make the conditions a lot stricter so you either have to jump through hundreds of hoops or pay them the bribe to make it all simple.

As for blaming the Brazillians entirely - there seems to be a tendancy for many US companies to export the worst of their management, the sort of guys that never got the message that slavery is a bad thing and that theft is ok so long as they don't get caught. Let's see what comes out in court.

Re:Would have gotten away with it too if it weren'

[cunina]

Paying taxes isn't stupid if your government provides worthwhile services. And if it doesn't, it probably because you have the kind of culture where people think it's cool to avoid paying taxes.

Re:Worse than ignorance, it's iggerunt.

[rossifer]

The US government is unbelievably not corrupt. We have a two party system, and if one party even gets slightly corrupt, it's a massive scandal. People who think the US has a corrupt government are invariably lacking real perspective.

You're observation is that when one member or another of the government breaks the rules, the others hold them to task. And that means that there's no corruption. Hm.

So it's your position that as long as the payoffs happen within the rules, it can't be counted as corruption? You are also aware that the rules are written by the same people receiving the money?

Corporations have written self-serving laws, handed them over to congress, paid the right congresscritters, and the laws were passed as originally written. But you're prepared to assert that because there are rules for that process and the companies followed those rules, that the US government is not corrupt.

Semantic bullshit. The US government is systematically corrupt. Just as illegal does not mean immoral, legal does not mean moral.

Re:Translation

[kjzk]

Maybe I'm wrong, but I expect corruption to become much rarer in 10 more years.

It's only getting started.

Re:More about Brazil:

[milamber3]

At first I thought this was a joke post...

More about Brazil:

9) The Brazilian media constantly emphasizes violent events in
Brazilian cities. However, the murder rate in Rio de Janeiro was, the last
time I checked, about two-thirds of the murder rate in the U.S. capital city,
Washington, D.C.

The murder rate in Rio de Janeiro is about 60 per 100,000 people and the rate in Washington DC is about 35 per 100,000 people so you really need to work on keeping up to date if you plan to make claims like this.

10) Brazil is the music appreciation capital of the world. Brazilians
have all the styles of their own music, and those of other countries, too.

What does this even mean. Every kind of music can be found in many many places in the US. Does that make us the music appreciation capital too? Is there some kind of international body that decides these things? I googled but came up with nothing so I'm left to assume you are just pulling things out of thin air cause they sound good.

11) Several years ago the most popular local band in Portland, Oregon
was Rubberneck [amazon.com]. On an average night they would draw an
audience of 40. A local band in a small town in Brazil drew an audience of
800.

There is going to be a lot more choices for entertainment in a place like Portland as compared to a small town in Brazil. This will lead to less people at any one show but not necessarily less going to enjoy a show. This is a weak argument that tries to make parallels where none should be made.

12) Brazilians often know all the lyrics to numerous Brazilian songs.

WTF does this mean?!? Please find a country that has music with lyrics and doesn't have people who know numerous of the songs. Then, maybe, this point would be worth typing out.

13) There is a magazine about Brazil called Brazzil [brazzil.com], based in Los Angeles,USA.

That's good. We probably have magazines for the majority of country in the world.

14) Brazilians are often very socially skilled.

Wow, I bet they eat and sleep like normal people as well but you forgot to list it.

15) Brazil is approximately as large as the continental United
States.

It's not a lot but since Brazil is 200,000 square miles smaller I wouldn't say it's the same size. I also wouldn't use total land mass as the best measurement. How about productivity / population?

Re:Worse than ignorance, it's iggerunt.

[jombeewoof]

But don't make it a show, with almost live television coverage. That's not the right way to run a country.

But it IS the American way of doing things.

Message to Innovative companies from Brazil

[Bill, Shooter of Bul]

Don't do business here. We will screw you over with taxes. Please find another country near us that has better laws and let them reap the economic benefits. I hear Argentina is nice this time of year. I'm sure their blend of multiculturalism and straight forward laws will suit you tastes better.

Sincerely,

The country of Brazil

Re:Worse than ignorance, it's iggerunt.

[Santana]

Alternatively, since most of America speaks a latin derived language (except the USA and Anglo-Canada), we might start using Angloamerica for the exceptions.

Re:Another Brazilian's point-of-view

[Drysh]

I'm Brazilian, too. You are right. The problem is that this is usual practice. But now it's getting more risky every day.

You know all your competitors are doing it, you know the police will find some, but not all of the corrupts, not even enough to let you sell your goods legally without any problem. So you have a thought choice:

- be corrupt like everybody else, sell your goods and risk jail.

- be honest and bankrupt because your competitors have a much better price.

Re:How to do business in corrupt countries

[Rick Genter]

So basically your choices are:
1. Do everything properly: Declare value, refuse to pay bribes (Illegal by US law), and have all your gear lost in customs for months, and very likely damaged.
2. Declare the value, and pay bribes out of your own pocket or with the assistance of your company. You have now committed a crime in the USA.
3. Declare the value low to go under the radar in the corrupt country. You have now committed a crime in the corrupt country, but hey, you can alway bribe your way out of it if you are cought.

4. Don't do business in Brazil.

If enough major corporations chose option 4, the problem would rectify itself.

Re:Only the stupid pay taxes in Brazil

[packeteer]

The taxes are probably so high BECAUSE of the the fact that nobody pays.

Re:In related news...

[superwiz]

Riiiiiiight. You think it's some nameless bureaucracy of IMF that you screwed? I actually know people who bought your bonds. So you screwed them out of 25% + interest on the rest of the premium after you "negotiations"? The take-it-or-leave it kind? I am sure your production is up quite a bit after stealing a few dozen billion. At the back of some people's pensions... but hey they are not really people, right? They are just US capitalists. Ok, dude. I was joking before, but given that the morons like you are still running some of the South American countries. I wish Cisco would flip Brazil a big one. No, dude, no one owes anyone a job. Ever. Anywhere. EVER! If Cisco was helping the poor bastards who were trying to hold Brazilian networks on a shoestring to keep down their costs, I say give a medal! You say it's not enough they went the extra mile to keep their customers happy. They also had to make some bunch of joe shmoes who happen to live close to their customers happy. Ummm. no! Keep on hating. Hate from people like you and them should only make Cisco proud. Would certainly make me proud.

Uhhh, well, that's about 6 buckets of retarded

[Sycraft-fu]

If you raise taxes, you get less compliance, not more. You can raise them to the point where compliance is a literal impossibility and it sounds like they are reaching that point, or passed it. The workable answer is to have reasonable taxes and work on increasing compliance.

Imagine if a store took a similar tactic: Some people steal merchandise, and others simply choose to go to other stores. Rather than perhaps raise prices a bit to cover costs and work on advertising and loss prevention the owner says "Well because people aren't buying, I have to double prices." Now the number of shoppers drops even more, so the owner again says "Even less people are shopping here, so I have to triple my new prices." Eventually nobody at all buys anything because it's just too expensive.

Similar shit with taxes. If the government raises your taxes a bit, maybe you complain but you still pay them. But let's suppose now that the government set them to an unaffordable level. Suppose that the government took 50% of your income, sales tax was also 50% and then other taxes like property tax added up to be over 100% of the rest of your income. Suppose that there was literally no way you could pay all the taxes. What would you do? Live in the street and try to pay them, or simply avoid them to the maximum extent possible?

It's easy to get a high and might attitude of "Well everyone should just pay," when it's not your ass in the fire and your family going hungry. However you try it some time, see how it goes.

If people cannot comply with the law, they just won't.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:Uhhh, well, that's about 6 buckets of retarded

[Cold-NiTe]

Agreed. You can't comply with something that is an absolute impossibility. You could order someone to walk off a cliff without falling, but even if they're willing to do it, they can only follow your orders up to the point that they're off the cliff, then they will fall no matter what you said and how you said it. Likewise, if people in Brazil are being Taxed to this extent, they can only comply with those taxes that they can afford to comply with and still maintain the means to live. As for the rest... Well that's falling off the cliff, isn't it.

Re:Worse than ignorance, it's iggerunt.

[orcrist]

Alternatively, since most of America speaks a latin derived language (except the USA and Anglo-Canada), we might start using Angloamerica for the exceptions.

We might, but... and this is a very significant 'but' since language depends on people agreeing on terms for mutual understanding... we don't.

Re:Only the stupid pay taxes in Brazil

[Anonymous Coward]

You Brazilians make me sick.

Go learn how to be a citizen. Pay your taxes, and DEMAND them to be returned in form of worthwhile services. Do a revolution if needed, instead of playing football the whole day and ignoring your problems. You want to know why Europe and US are the first world, while you will always be the third? Because we had revolutions, DEMANDED our rights, and imposed reasonable laws that the government AND citizens HAVE to follow, instead of cowardly breaking the law as a national sport and stupidly claiming that law-breaking is bliss.

Now I understand why Brazil is a country which people despise: instead of following the laws and paying taxes, their citizens prefer to break the law. Without law, there's no order, no future, no progress. No group can evolve without laws, it becomes chaos and corruption. If you think your taxes are too high, CHANGE THE LAW, but pay what the law dictates until the law changes.

No wonder you say your political representatives are so corrupt. They are only the reflex of their own citizens. Look at the mirror and you will see what the fundamental problem of Brazil is.

Re:Translation

[Anonymous Coward]

I've had friends with a similar experience in Brazil. They were travelling to a hangliding competition there, they didn't pay the right bribe, and ended up with their equipment confiscated. Noone else had problems, because they were told what to do.

I have lots of Indian friends, and they all say exactly what you said about the bribes in the public sector...

It's not just Cisco fault.

[Lisias]

Organizations can't be better than the people inside them.

We have a very serious ethics problem here at Brazil: some people thinks it's ok to break bad laws instead to fight against then.

In the same time, our goverment takes advantage from that making really nasty (but profittable) laws to harvest every cent from the brazilians that don't want (or can't) break the law.

To gain an edge (or to protect itself from others taking the edge), some managers choose to break the law in the name of theis jobs - blatantly ignoring the fact that some day that mistake can be charged.

They take their chances on the short run, as all they have to loose is their jobs - what they already are loosing anyway, as their employers can't earn a good money paying every tax and duty.

Re:Only the stupid pay taxes in Brazil

[amendonca]

I am brazilian as well and I agree that the tax system there is idiotic. The distorted logic is that high import tariffs somehow foster the development of a national industry. It's a game of vested interests, bribes, corruption, etc.

However, if CISCO is found guilty I will commend the authorities for what they're doing.

Reality, my friend, is that people shouldn't choose which laws to follow, which laws to break. The involved executives, if proven guilty, are not preaching civil disobedience. Instead, they want to increase the bottom line and have a fat bonus at the end of the year. That's exactly the reason why Brazil is what it is today. And by somehow condoning or justifying their business practices we're simply perpetuating the problem. Can't we just be honest and obey the freaking law? Really ... is that too much to ask?

Finally, your characterization of the problem with public servants in Brazil wasn't exact, I'm afraid. It's true that we don't have the entrepreneurial spirit seen in countries such as the US, and many people do grow up to work for the government, partly because of also distorted labour laws, who give these people the so called "stability", which can be understood as "I can be a slack and not get fired".

However, many public servants are responsible citizens and you shouldn't hold that against them. Both my parents were public servants (they retired after 30-something years working) and they are some of the most hard working people I've ever seen. I have many friends who work for the government, some by choice, and they are all responsible, hard-working people. And just to clarify, I believe only congressmen and senators retire after 8 years. Statistically speaking they are the vast minority.

My 2 cents.

Regards,
Andre

Re:Would have gotten away with it too if it weren'

[Anonymous Coward]

If my government only collect enough taxes to support the things they should be doing, rather than what they are doing, I probably wouldn't mind paying taxes so much.

Re:Only the stupid pay taxes in Brazil

[alberion]

Thank you!
I was hopping to meet another Brazilian who had more than half a brain!
You got it right! The main problem is exactly that, if you don't agree with some law, you fight to revoke it, but you CAN'T CHOOSE WHICH LAWS YOU FOLLOW AND WHICH YOU DON'T.

And if poor old CISCO did what they did. And I am sure their clients paid full price for the taxes they didn't pay (and I know this because I already made quotes for CISCO equipment) off to jail with them.

So there!
And to all those that believe that you should only pay taxes when you get got: I hope you move to some other country if any will have you!
I had a choice and I am still here, paying my taxes so all you losers can evade yours and complain about poor public service. WTG.

Re:Would have gotten away with it too if it weren'

[rbanffy]

"Any businessman wanting to evade US$ 1.5 billion in taxes would have to be nuts to open an office there after this."

There. Corrected that for you.

Re:Would have gotten away with it too if it weren'

[rbanffy]

"Paying taxes isn't stupid if your government provides worthwhile services."

Just a thought: If you don't pay taxes, you can't wonder why the government doesn't have the money to provide worthwhile services.

Just on the line of "If you don't get involved in politics - some to the extent of not even bothering to vote - you can't complain much on who got elected"

Multiculturalism?

[Wooky_linuxer]

No offense to my argentinian "hermanos", but Argentina is about as multicultural as a WASP meeting. I don't see why people are so upset with the case. People committed a crime (it is a criminal offense here), they go to jail. I wish more high-ups would go to jail when caught wrongdoing.

To all trolls that keep saying "stop doing business in Brazil", do you really think CISCO and others do business here because they want to be kind to us? They want us to have access to that-oh-so-nice-and-advanced american hardware so we can be happy? They want to sell their stuff and that's all. If they leave the market, someone else will take it. And in case you haven't noticed, China has been replacing US as a hardware provider. Perhaps they still haven't got routers as good as CISCO's, but they will eventually. And if american companies leave markets open to them, the quicker they will. So good luck for any american companies wishing to leave the brazilian market.

Besides, the ones who really suffer with the high taxes and corruption are brazilian people and consumers. I highly doubt CISCO passed on the savings they got to their clients. Stop whining just because some american company was caught red-handed.

Re:have you ever been there?

[hesaigo999ca]

I would have to say if the discussion is about the amount or the way the taxes are paid , it would to be a general discussion, but there are too many black holes in our information about this situation to start making assumptions about a specific countries tax system, unless someone has first hand experience.

You can't either use your parents as a point of reference on this, unless they have worked in Brazil , as the public servant positions there, greatly differ from ours here. The amount of corruption is also a factor. You have to remember that although we like to bitch, we have it pretty good in north america, wether you talk about canada or usa.

I would love to hear from a politicians point of view about working in that country. Although I am sure a lot of b*llsh*t would be vocalized as any politcian would, I tend to think you would be enlightened as to the situations over there....