Article - Fair competition: regulation is necessary
Legal certainty is one of the basic factors for the health of an economy. Brazil has been trying for some time to move forward with regard to the formulation of laws that give the actors of the economic scenario the minimum guarantees of solid ground on which to act. However, it is not enough to formulate laws. It is necessary to regulate them in order to fulfill their objective.
One of the most emblematic cases of an unregulated law is that of Article 146-A of the Federal Constitution. I explain. On December 19, 2003, the country took a big step in the direction of ending the use of tax evasion to reduce the cost of products and, thus, obtain competitive advantages in the market. In some segments, this practice goes beyond just obtaining one or another advantage and is characterized as permanent unfair competition. Taxation has a direct impact on competition, which can be seen when a company repeatedly fails to pay a tax, creating an imbalance in the market as a whole.
Today, only the Union has the competence to institute differentiated taxation systems in order to prevent competitive imbalances. As we said, these imbalances are caused by the actions of companies that use the reduction of their tax costs to gain spurious advantages.
Resulting from Constitutional Amendment nº 42/2003, article 146-A allows - in addition to the Union - States, Federal District and municipalities to institute different taxation systems, applicable to the taxes within their competence, to prevent competitive imbalances in specific cases.
Article 146-A was approved almost ten years ago. Since then, the enactment of the complementary law, which is essential to regulate the adoption of necessary tax measures, is awaited in order to avoid unfair competition caused by tax effects.
The provision foresees that the differentiated taxation systems adopted by the Union coexist with new special criteria, to be defined not only by it but also by States, the Federal District and municipalities, when it is necessary to ensure that the tax burden is uniform for the agents that compete in the market.
Writing the article is simple. It says: “Art. 146-A. Complementary law may establish special taxation criteria, with the objective of preventing competition imbalances, without prejudice to the Union's competence, by law, to establish norms with the same objective. ”
The practical effect of the regulation is that certain taxpayers may be taxed differently from others, with the aim of leveling the tax burden (tax function), which would otherwise be unequal, thereby preventing any possible competitive imbalance (extra-fiscal function) .
Regulatory law may, for example, allow States to charge ICMS in advance in markets that are more susceptible to tax evasion. This is called the anticipation of collection of the taxable event. States may also collect taxes on a production chain at once. It is single-phase taxation, which is already adopted by some States, but in different ways. The law will serve to standardize this single-phase taxation.
Another example of an important measure that the regulation will allow to be adopted at the state level is the specific rate, ie, a special tax regime, with a fixed amount per unit of merchandise. It will also allow the adoption of weight, volume or flow meters, as it will regulate the installation of equipment to make differentiated tax regimes effective, such as the specific rate.
It is essential that the complementary law is not late to be drafted, and that it is correctly formulated, under penalty of ineffectiveness of its provisions, or worse, of becoming just another collection instrument.
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