The tax reform puzzle


Author: Joaquim Castanheira

Source: ETCO Magazine, No.10, August 2008

Like some animals, tax reform is an issue that hibernates during
awhile and suddenly awakens with reinforced vigor. In the last decades,
the in and out of the theme is repeated, on the agenda of the federal government, Congress and
various business and civil society entities. Right now, there he is,
in the form of the Constitutional Amendment Proposal, PEC, 233/2008, proceeding in a
special committee of the Chamber of Deputies. The text suggests important changes
in the country's current fiscal structure. Among other measures, he highlights:


ETCO Magazine: Minister Guido Mantega

- To unite Cofins, PIS, education salary and Cide in a wide Value Tax
Aggregate, VAT;
- Combine Income Tax and CSLL in a single tax;
To institute a new ICMS, which will have a single legislation, with rates
uniforms charged in the destination state, in order to avoid war
It is not yet known when the government project will go to plenary,
but its discussion has already aroused the most varied reactions from all parties
stakeholders - which, if added together, represent the whole of Brazilian society.
“The reform proposal is already mature, as it has been widely discussed with
states, municipalities, entrepreneurs and workers and will now go through the debate
National Congress. In addition, the states themselves are already
convinced that the ICMS tax war has become obsolete and needs to be
definitely settled, ”says Finance Minister Guido Mantega. For
federal deputy Sandro Mabel (PR / GO), rapporteur of the project in Congress
National, it is a “broad proposal, which provides for simplification and
reduction of the tax system. ” Other experts have a vision
more critical in relation to the subject. The former Federal Revenue Secretary and current
consultant Everardo Maciel, owner of a sharp humor, calls one of the points of the
proposal (which deals with a new Federal Tax on Transactions with Goods and
Provision of Services) of “gaseous invertebrate” - try to define what this
means, and you will have an accurate idea of ​​the opinion of the tax attorney "It `s something
about which you have no idea what it is, ”says Maciel. The
professor at Fundação Getúlio Vargas-RJ, Luiz Emygdio Franco da Rosa Júnior,
states that, as it stands, the tax reform under discussion in Congress “is
a half sole ”.


ETCO Magazine: Everardo Maciel

There are at least two major questions to be answered. One: this proposal
meets the demands of the country's various economic sectors? Two: the project has
the focus on what really matters right now? In the first case,
there may be confusion. What is being asked for today is a reduction of the tax burden in the
country - and that “is not under discussion in this project”, as stated by the professor
André Montoro, executive president of ETCO. “Everyone supports it because they think he
it will decrease the load, but there is no proposal for that. ”


The second question incorporates another possible distortion. The project foresees a
simplification of the Brazilian tax structure, but perhaps it is not as
complicated like that. The number of taxes, those that apply to everyone, is not as
big. What exists are dozens of specific fees for this or that
service or well. There is the Passport Renewal Fee, the Passport Authorization Fee
Foreign Labor, the Inspection Fee for Products Controlled by the
Brazilian Army, for example. Not everyone pays. “There is justice in this demand,
because they reach those who use the service offered ”, says Maciel. Beyond
Furthermore, the much-criticized complexity of the system may have a real basis, but
it is far from what happens in other countries.


The United States, for example, has a state income tax, in addition to
federal taxes, and fuel consumption taxes levied by the Union and by
some states. In Germany there is even a municipal income tax. It's good
remember that, here, taxpayers make their annual statements in the
internet and in extremely simple forms when compared to those of other
countries. In the opinion of experts, what complicates the life of companies is not
exactly the number of taxes. Today, with access to technology, software
solves most of the problems. The headache comes with constant changes
in the rules of the game. In the cigarette sector alone, in one year there were 500 changes
in legislation in general. “What we need is clear rules and
lasting ”, says professor André Montoro.


ETCO Magazine: Ives Gandra Martins

There is still an evil of origin in the proposal sent by the government, as the
tax expert Ives Gandra da Silva Martins, professor at Mackenzie University.
“It alters or has implications for more than three dozen articles in the
Constitution. It will be one more fragmentation of the Magna Carta, with all the difficulties
interpretations that any change always generates, no matter how small ”, says
him. “This causes conflicts that further increase the stifling volume of
work of the Judiciary. ” In the opinion of Ives Gandra, the items addressed by
reform could be dealt with by ordinary laws, which would reduce
the potential for questioning in court. “In changing the IVC
for ICMS, to conceptually define 'operation', 'circulation' and
'merchandise', the Federal Supreme Court took 20 years, ”he says. The teacher
André Montoro adds: “As Everardo Maciel warns, the tax system is
the accommodation of various interests over time. When this
stability, a new accommodation begins, which can consume years of


Minister Mantega has another opinion. “Currently, the number of cases
court cases that question federal taxes is considerable, including and
especially the taxes that are being replaced, ”he says. “Courts
higher education institutions are full of resources from taxpayers and the Union
tax. It is enough to verify the high number of subjects of law
tax involving the Social Contribution on Net Income, CSLL, the
Cofins and PIS, for which the Supreme Federal Court, STF, has already recognized
“general repercussion” mechanism, which means that it is a relevant issue
for the constitutional order. It can be said that there is no such stability in
jurisprudence. With the simplification of the national tax system that we are
proposing, it can be predicted that the number of lawsuits will tend to decrease ”,
says the minister.


Changes in tax rules are of even greater concern to sectors
taxed. "In them, evasion is a competitive advantage", says Jorge Luiz
Oliveira, director of coordination at Sindicom, the union that brings together the
fuel distributors. Having earned 154 billion reais in the year
In the past, the sector raises 50 billion annually. Only in recent years,
companies in this market were able to inhibit the performance of competitors that
used legal resources to avoid paying taxes. In June 2000, 73%
of type C gasoline, the most sold in Brazil, were removed from the
Paulínia, the largest in the country, by companies not associated with Sindicom. Of these,
90% did so with injunctions that guaranteed the non-payment of PIS / Cofins and


With the creation of Cide, the action of the Federal Revenue and the understanding of Justice
Federal Government that taxes should be collected at the time of withdrawal
fuel, the maneuver lost strength. Currently, only 22% of type C gasoline
leaves Paulínia through less traditional companies and the number of
injunctions came close to zero. “It took us ten years to reach a situation of
great legal security ”, says Dietmar Schupp, director of taxation of the
Sindicom. “The sector is concerned with losing this level of security with the
changes. ”


The distributors therefore defend the maintenance of Cide, a tax
regulatory framework that makes life difficult for those who think of under-invoicing products. That
because the contribution is calculated from a fixed amount (0,18 reais,
currently), which applies to each liter of fuel sold. “Taxation
specific, the one that calculates the tax from the unit and not the price,
strongly reduces the possibility of under-invoicing ”, recalls Professor André
Montoro. This is the case of the beer sector, in which the IPI is charged per unit and not
by value.


ETCO Magazine: Sandro Mabelt

There is a fear that the reform will act as a kind of reverse gear for
some achievements in recent years. One of them refers to the single-phase tax and
to the tax substitution regime, responsible, in several sectors, for the
substantial reduction in tax evasion. In the case of fuels, for example,
the collection takes place in only one link in the chain: the refineries, in almost their
all belonging to Petrobrás. It is simpler and safer to charge from just
a company than trying to inspect the approximately 200 distributors and 35 000
fuel stations scattered throughout Brazil. “The project does not directly threaten
this instrument ”, says Josefino Borges, manager of indirect taxes at
Souza Cruz, the largest cigarette manufacturer in the country. “But when you move the tree,
a branch may fall. ” In fact, since PEC 233 arrived at the National Congress,
almost 500 suggestions for amendments by parliamentarians were filed. The possible
avalanche of changes worries former secretary Maciel. “There is always a risk of
take advantage of these occasions to 'fit in' things that have nothing to do with the
purpose of reform, ”he says. “We know how the project got to Congress, but
we don't know how it will get out of there. ”
For this reason, executives in sectors such as
cigarettes, in which 60% of the final price of the product corresponds to the tax burden,
closely follow the proceedings in Congress. There, some good (and necessary)
ideas can stray from the path. The proposal in relation to the ICMS, for example,
it looks positive - at least at first glance. The unification of laws
governing the tax is an old claim of society
Brazilian. Each of the 27 Brazilian states deals with the matter in a different way.
different, which creates a “tributary salad”. But the proposal leaves open
important issues. One of them is the definition of the rates that will be charged.
PEC refers the decision to the National Council for Farm Policy, Confaz,
composed of the state finance secretaries. Congress would be left with the role
to approve or reject the rate presented by the agency.


"It is the greatest thing I have ever seen in the Republic," says Maciel. “It is a usurpation of
legislative function of Congress. ” The change in the ICMS may result in another
problem. With the standardization of tax rates, some states will suffer
collection losses. To circumvent this problem, the reform project envisages
clearing through a Stabilization Fund, whose format and sources
resources are not foreseen. So, where will the money come from to compose
this fund? It is not known, but, as Ives Gandra recalls, an increase in the
taxation can never be ruled out in Brazil. It looks like an old movie with
minor changes to the script.




1- Admit mechanisms that allow taxation to be concentrated in the link
safest in the chain. This can be achieved both by single-phase taxation,
as by Tax Substitution


2- Admit the specific taxation regime, especially for the sectors
more expensive and for imports where there is evidence of under invoicing;


3- Maintain taxes with regulatory and selective characteristics, such as CIDE
Fuels and IPI;


4- Ensure the uniformity of ICMS rates, with a maximum rate fixed
by the Federal Senate, obeying characteristics of selectivity and essentiality
of the products;


5- Obey the principle of priority for the new federal tax;


6- Establish, in relation to the taxes subject to priority, that it will only have
the tax rule approved until June of the previous year;


7- Promote the consolidation of the Income Tax and the CSLL, without differentiating
rates between economic sectors;


8- Contingent the current tax pressure, not allowing increases in
rates or calculation bases;


9- In addition, establish automatic adjustment mechanisms that result in
decreasing tax pressure.