Reflections on the regulatory nature of the IOF


Author: Everardo Maciel *

Source: ADVFN - Agência Interativa, 17/01/2008

January 17, 2008 - Tax issues are usually controversial, due to the very nature of the matter and the historical indisposition of citizens against taxes, as noted by the notable German tax lawyer Klaus Tipke, in his consecrated work “Morale tributária do Estado e dos Contributors ”(“ Besteuerungsmoral und Steuermoral ”).

In Brazil, this controversy often follows a judicial course due to the excessive constitutionalization of tax matters. No country in the world has anything similar in its constitutions.

It is unimaginable, in any other country, that technical issues such as non-cumulativeness, selectivity and tax substitution are included in the constitutional text. Could, for example, the ICMS, considered in the Constitution as a non-cumulative tax, admit the illiquidity of the millionaire volumes of accumulated credits resulting from export activities?

The inevitable consequence is that, due to the diffuse control of constitutionality, the controversies drag on for endless periods until the Supreme Federal Court (STF) definitively resolves the issue. Meanwhile, legal uncertainty produces distortions in competition, leads the State to devise tax solutions that are not always technically adequate and, above all, produces mountains of credits in favor of the Tax Authorities or the taxpayer, whose settlement produces considerable damage to one of the parties.

In this context, as Professor Hamilton Dias de Souza rightly reminds us, the fact that the ICMS, our most important tax, in terms of tax collection, has definitely not been clarified.

I make these remarks regarding the controversy that is intended to arise regarding the regulatory nature or not of the Tax on Financial Operations (IOF), including in Direct Unconstitutionality Actions (ADI) that recently joined the STF.

I have long considered classic tax taxonomies obsolete, such as those that divide taxes into direct and indirect taxes or those that classify them into regulatory and tax collection.

With the exception of certain situations, it is difficult to classify a tax as direct or indirect. It is evident that the Income Tax (IR) of individuals is a direct tax and that the ICMS is an indirect tax. In the case of cumulative taxation of PIS and Cofins, there is no clarity.

The vast majority of scholars classify PIS and Cofins as indirect taxes and, based on this observation, make dramatic conclusions regarding the nature of the Brazilian tax system and its distributive justice. Apart from considering that it is a mere intellectual reproduction of academic manuals adopted at universities in the United States, where by tradition and convenience income taxation prevails strongly over consumption taxation, contrary to what happens in Europe, it is striking that the basis calculation of PIS and Cofins, in the cumulative hypothesis, is exactly the same as that of corporate income tax, when taxed under the presumed profit regime. Would it be reasonable to understand that corporate income tax, opting for presumed profit or Simples, should be counted as an indirect tax? Of course not! No one has ever been so heterodox as to proclaim such heresy.

Despite this, many consider PIS and Cofins to be indirect taxes, even when cumulatively taxed. Incoherence and simplism are evident.

Would the IOF be a purely regulatory tax? By enforcing the National Tax Code, in its art. 67, having as matrix the 4th paragraph of art. 21 of Constitutional Amendment No. 1, 1969, we may be tempted to admit that it is. This article says that the net revenue from the tax would be allocated to the formation of monetary reserves, according to the law.

It so happens that since September 1988, with the edition of Decree-Law No. 2.471, the IOF started to be administered by the then Federal Revenue Secretariat (SRF), in place of the Central Bank (BC), and the proceeds of its collection became integrate federal public revenues.

This is a remarkable fact that emancipated this tax from the exclusive domain of extrafiscality. Since then, the IOF is considered, in budgetary projections, as a source of financing public expenditure, including for purposes of linking with expenses related to the maintenance and development of education, pursuant to art. 212 of the Constitution.

In 2006, a tax responsible for approximately R $ 6,7 billion could not be considered as collection - higher than the sum of the collection of the Tax on Industrialized Products (IPI) on tobacco and beverages and much higher than that of the Property Tax Rural Territorial (ITR)? Its collection nature, however, does not eliminate the regulatory, as occurs with the Import Tax (II), whose collection, in 2006, totaled R $ 10,2 billion.

The truth is that there are no longer strictly regulatory taxes. Even the export tax, considered a notorious regulatory tax, in Argentina, is an important item of tax collection. In recent years, the IOF, when necessary, was used as a collection instrument, including to temporarily make up for the absence of the CPMF in 1999. These are the facts.

Roberto Campos, with his extraordinary sense of humor; he once said to me: "More serious than profaning sacred things, is to sanctify profane things".

kicker: The IOF, when necessary, has been used as a source of revenue

Source: Gazeta Mercantil (Notebook A - Page 3)

EVERARDO MACIEL * - Tax consultant and former Federal Revenue Secretary. Next author article on February 7)