Minister Joaquim Barbosa, of the STF, accepted the request of the Federal Government and maintained the legality of the RF act that canceled the special registration of a cigarette manufacturer due to tax defaults.

In his decision, JB stated that "the risk to individual and collective health is well characterized", as there is "a strong relationship between the tax burden and the formation of the sale price of products and services".

The minister explained that the option cost, "that is, all the utility that the buyer loses when purchasing a good in exchange for money, increases approximately at the rate of the price increase, influenced by the tax burden".

The case

According to the Federal Government, the tobacco company had its special registration canceled due to tax defaults. It is stated in the records that the judgments of the 5th Federal District of the DF and the TRF of the 1st region “have systematically been granting favorable measures for the continuity of the operation of the interested company”.

The Brazilian Institute of Ethics in Competition - ETCO, which acts in the process as an assistant to the Union, took market information to the minister that demonstrated that the permanence of a persistent tax evader in the cigarette market, without being subject to any sanctions, violates free enterprise and balanced competition in a sector marked by the extremely high tax burden.

The company, however, stated that there is a material error in the data presented by the Union, in reference to the composition of the company's active debt.

In analyzing the case, Minister JB also explained that the abbreviated procedure for canceling the special registration for the operation of companies refers exclusively to the tobacco industry, "for precise and proven issues in addition to reasonable doubt related to public health."

The minister also stated that “the risk argument for free enterprise and balanced competition would only be admissible if each taxpayer could fully control the criteria used to apply tax rules, both those that define the tax burden and those that effectively prohibit tax. exercise of lawful economic activity ”.

The Brazilian Institute of Competition Ethics - ETCO acts as an assistant to the Union and is represented in the lawsuit by lawyer Ana Tereza Basilio and lawyer Marcelo Ludolf, both from the firm Basilio Advogados.

Related process: STA 752

Check the decision in full.