COST OF TAX COMPLIANCE AND RISK MANAGEMENT IN PROJECTS: THE CASE STUDY OF A SMALL ENTERPRISE

This study uses a risk management perspective to analyze compliance costs arising from overlapping service tax (ST) jurisdictions. We study the case of an engineering company providing services to the Companhia de Saneamento Basico do Estado de Sao Paulo [Sao Paulo State Sanitation Company] - SABESP, a public entity. The engineering company was contracted under public law 8.666/93, to provide engineering service in several townships in Sao Paulo's metropolitan area. Because the laws governing bidding do not permit later modification in price or provider, subsequent double taxation by one municipality cut into the firm's margins, and should other local governments follow suit, multiple taxation would render the contract untenable for the provider. Our paper models the impact of conflicting jurisdictions on administrative burden, psychological costs and profit constriction and discusses project management techniques for decision making and management in similar situations