Source: Gazeta Mercantil, 12/12/2008

December 12, 2008 - With so much mismatched information published in the press, it is time for us to pay attention to the federal value added tax (IVA-F), whose contribution to the simplification of the tax system is undeniable, which is being created by the project of tax reform under way in the Chamber of Deputies, under my rapporteur.

First of all, we must pay attention to the developments introduced by this rapporteur with regard to the taxpayers' rights. Unlike the original federal government project, the model of this IVA-F guarantees full and unrestricted credit rights and defines, in a very detailed way, the possible taxable facts, in addition to eliminating the possibility of recreating a “CPMF” by through this new tax mechanism.

All these changes were made - - contrary to what some have propagated - after much negotiation and discussion with the government, Congressmen, entities that represent the business community, consultation with several jurists, in-depth research of foreign legislation and even visits that I made personally to the team OECD tax law in Paris.

If the tax reform is approved in the National Congress, we will have the possibility to implement in the country the most modern model of taxation on consumption in the world, equivalent to that which applies to any country in the European common market or OECD member country.

However, as there are still criticisms related to the constitutionality of some specific provisions, I cannot refrain from making any further clarifications.

First, it is worth saying that the criticism related to the unconstitutionality of this new tax incidence is unreasonable as it is similar or cumulative to the ICMS. The subject has already been examined many times by the Supreme Court. In this case, a new source of incidence is not being created by a complementary law, under the terms of article 154, I of the Federal Constitution of 1988. Thus, the requirements of the impossibility of creating new incidences with the same base of other taxes do not apply to changes arising from a Constitutional Amendment, such as this tax reform project.

Nor are criticisms related to the impossibility of credit in the exemption or zero rate, the integration into the tax base itself and in the definition of services. I briefly explain the reasons.

The rule indicated in item one is equivalent to that which already applies to the Tax on Circulation of Goods and Services and the Tax on Industrialized Products and does not differ from what exists in the rest of the world in the implementation of VAT. However, in this case, it is left to the legislator to determine the maintenance of credit for certain categories, when applicable.

Regarding item two, we are also against the question of integrating the tax into its own calculation base. For this reason, it can be noted that the original project of the federal government was changed to include the expression "may". Thus, if Brazil decides to adopt a taxation model in which taxes are no longer included in its calculation bases, this reform project is adequate.

And, finally, the question of the definition of services. Here, too, one should check the existing developments in the current version of this project compared to the original text of the government sent to the National Congress at the beginning of the year. The generating facts are well delimited. Onerous operations with goods, services and rights. All legal operators know that one cannot escape the legal concepts already known in relation to these institutes for taxation.

I recommend to everyone a careful reading of the report that I released with the text of the tax reform that went to the vote of the Special Commission that can bring several clarifications on questions or doubts that may already be resolved.

kicker: "This reform makes it possible to implement the most modern model of taxation on consumption"

(Gazeta Mercantil / Caderno A - Page 7) (Sandro Mabel - Federal deputy, rapporteur for the Tax Reform Project)