Source: Valor Econômico, 01/12/2008

With each new edition of the Federal Official Gazette, legal operators,
unskilled accountants and taxpayers are surprised by
successive changes in the tax regime in Brazil. All, in
general, marked by their case-by-case content or resulting from measures
provisional statements edited without observance of constitutional assumptions
authorizers. The volume and speed of the changes are such that,
often, there is a clear impression that the federal government conducts its
fiscal policy - if there is one - from the trial and error method,
without any planning or commitment to minimum postulates of
coherence.

One of the most emblematic cases, without a doubt, is that of Cofins. Since 1991, when
the tax was instituted, its legal-tax regime has been acquiring a
remarkable - and, above all, unjustifiable - complexity. Next to Cofins
“Traditional”, cumulative and incident on billing, the legislator
established a non-cumulative Cofins that focuses on the gross revenue of
legal entities. And, as if that were not enough, making the
tribute discipline, instituted a “single-phase” Cofins, followed, since January
2004, of a Cofins levied on the import of goods and services.

Without being satisfied, the legislator went even further. And about the same
basis of Cofins, decided to exercise the fullness of its creative genius
about the old PIS / Pasep. The tax, originally instituted by Laws
Complementary Nos. 7 and 8, from 1970, was then divided into five: PIS / Pasep
cumulative incident on billing; the incident non-cumulative PIS / Pasep
on gross revenue; the PIS / Pasep on the import of goods and
services; the PIS / Pasep on the payroll; and PIS / Pasep on the
revenue and transfers of legal entities under domestic public law.

It is undoubtedly a chaotic picture - unfortunately, only one among
so many others - which illustrates the unfortunate reality of the tax system
Brazilian. For this reason, the initiative for the unification of the
PIS / Pasep and Cofins - and also education wages - in a single tax on
the federal added value - the IVA-F -, proposed in the latest version of the
tax reform pending in the National Congress.

The new tax, however, is still marked by problems of the past. The proposal
insists on the prohibition of credit in operations subject to zero rate, exemption,
non-incidence and immunity. This prohibition, created in 1983 by the so-called amendment
“Passos Porto”, as a way of increasing the collection of the then ICM, generates effects
extremely damaging to the economy, from the well-known cascade effect to
unfair competition between imported and domestic products.

The amendment also provides for the so-called calculation within the VAT-F, a mechanism
also inherited from ICMS, in which the value of the tax integrates its own
basis of calculation, generating a real rate higher than the nominal. Thereby,
the tax burden is increased in a veiled way, hiding the effective impact of the
tax, to the detriment of fiscal transparency - a value that has not yet been realized
among us, although provided for in paragraph 5 of article 150 of the Constitution
Federal.

The most unfortunate aspect, however, is the attempt to introduce
constitutional text a special definition of service for the purpose of
VAT-F: provision of services is considered to be any and all operations that do not
constitutes circulation or transmission of goods. Such a definition is completely
foreign to the field of legal knowledge. In addition, it collides directly with the
concept of service long adopted in private law and tax law.
If approved, this aspect of the proposal will certainly be a source of endless
judicial inquiries, harming even the interpretation of the
other taxes, such as ISS. It also reveals the lack of technique
of the project, as a result of the growing alienation of jurists in the
of preliminary projects in tax matters. In the first lessons of introduction to the
study of law, it is known that it is not the function of the legislator to formulate concepts or
definitions - in this case, clearly motivated by a collection scope. These,
in fact, they are constructed by doctrine and jurisprudence from a
systematic interpretation of law, its institutes, rules and principles. Not
it will be the recent tax reform proposal that could change this
reality.

Few in number, but significant in extent, such deficiencies
need to be removed from the tax reform proposal. Otherwise, VAT-F
will no longer be a path to fiscal simplification to become more
an instrument to increase the tax burden and violate rights
constitutional rights of the taxpayer-citizen.

Solon Sehn is a lawyer, master in tax law by the Pontifical
Catholic University (PUC) of São Paulo, professor of graduate studies in law
of the Centro Universitário Curitiba (UniCuritiba) and author of the book
“Cofins levied on gross revenue” by Quartier Latin publisher

This article reflects the views of the author, not of the newspaper Valor
Economic. The newspaper is not responsible and cannot be held responsible for
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