Author: Rubens Branco, tax attorney

Source: Jornal do Brasil, 17/11/2008

We return to the subject of tax reform since, with the more than 360 items contained in it, it is so voluminous that it is necessary to read it more than once to verify its true repercussions in the life and pocket of taxpayers.

One of the observations I make is the fact that we are transforming our Constitution into a real tax patchwork, since we are not actually reforming the tax system, but the Constitution itself in 360 items.

According to Deputy Sandro Mabel, reporter of the reform, the constitutionalization of the tax changes was made on purpose so that the changes are effectively implemented.

A parliamentarian is recognizing that if we want to obey the laws, they have to be incorporated into the Constitution, because otherwise they may not be obeyed.

I see this as a concern, because soon the Constitution will be so trivialized that, in the very near future, it will also cease to be fulfilled by the taxing entities (Union, States and Municipalities), because the Supreme - the guardian of the Constitution - will not be able to analyze the huge number of legal disputes that will arise.

By transforming tax legislation into constitutional norms, despite the good intention of the rapporteur, we will be causing a great deal of institutional chaos, unless the Constitution is also changed to increase the number of ministers who will sit in the Supreme Court.

Returning to the theme of new taxes, the one that in my view may affect the citizen's pocket is the new IVA-F, in which PIS / Cofins, Cide and Salário Educação will be added.

I say this because in item VIII of article 153 it is defined that VAT-F will apply to onerous transactions with goods and services. As the wording is generic, and there is no restriction that it will apply to onerous operations of goods and services that are not the basis for calculating other taxes - which we will probably assist, if this is to be implemented as proposed - the operations subject to ISS and ICMS may also be taxed by VAT-F.

What is worse is that this new VAT-F will also integrate its own calculation base, as provided for in item IV of article 153, which is a Brazilian way of misleading the taxpayer, as the nominal rate will never, in fact, represent the real burden. When integrating its own calculation base, the tax is higher than it appears (as in the ICMS, where everyone thinks that the rate is 18%, but as it integrates its calculation base, the real rate ends up being 21%, but nobody can see that).

This concern about the fact that VAT-F can also be charged on transactions subject to ICMS and ISS is not just mine. A large number of state governors have already expressed this concern to the rapporteur, which is why the governors put some pressure on tax reform not to be discussed at this time, leaving the agenda to be discussed with more time after we have overcome the real tsunami. global economic situation that has been affecting all economic activities, including that of Brazil.

Let's hope that good faith and common sense dominate the minds of our government officials, and that we can discuss this topic with more care and time, to avoid further increasing the real chaos that already exists today in Brazilian courts, where more than 60% of disputes involve taxes in general.