After 10 years, Article 146-A of the Constitution receives bill in the Senate

Senator Delcídio Amaral (PT-MS) filed, on May 7, the Senate Bill (PLS) 0161/2013, which regulates the establishment of special taxation criteria with the objective of preventing competition imbalances, under the terms of Article 146-A of the Federal Constitution

Approved ten years ago, article 146-A aims to prevent competitive imbalances caused by tax fraud, through the adoption of special taxation criteria not only by the Union but also, after the promulgation of PLS-0161, by States, Federal District and municipalities. One of the factors that cause unfair competition between companies in Brazil is the use of tax evasions to reduce the cost of products in relation to competitors who comply with tax obligations, thus obtaining illicit competitive advantages.

This occurs when there is an anomaly in the functioning of the market capable of affecting the mechanisms of price formation, free competition and freedom of initiative, as a result of acts in any form manifested by an economic agent, which allow the non-payment of tax borne by other contributors.

“We believe that this is one of the most important steps in the fight against unfair competition in the country in recent years. Senator Delcídio's proposal deserves our full support, not only for the opportunity of the initiative, but also for the correctness of the proposals contained therein ”, says ETCO's Executive President, Roberto Abdenur. He recalls the Institute's active participation when the inclusion of Article 146-A in the Federal Constitution.

Among the instruments that may be implemented by the Complementary Law is single-phase taxation, which, through tax substitution, allows taxes spread throughout the production chain to be collected at once. “Today, states already apply this mechanism, but since there are no regulations, each one does it differently. The Law will come to standardize this, in addition to other important procedures to combat tax evasion ”, concludes Abdenur.

Pedro Taques defends special tax criteria

Senator is rapporteur of the project at the Economic Affairs Committee

Public Relations

Cups: "We can combat competitive distortions resulting from tax evasion"

WRITING

Senator Pedro Taques (PDT) defended today (15), during a meeting with the Brazilian Institute of Competitive Ethics (ETCO), the regulation of article 146-A, of the Federal Constitution, which provides for special taxation criteria and should prevent competition imbalances.

“The regulation, among other things, will allow states and municipalities to prevent tax evasion companies from continuing to operate in the market. In this way, we will be able to combat competitive distortions resulting from tax evasion ”, said Taques, appointed rapporteur in the Senate Economic Affairs Committee (CAE) of the bill that defines the tax criteria.

As highlighted by ETCO's president, Roberto Abdneur, the measure is fundamental for the consolidation of a safe, healthy and ethical business environment.

"Among the many factors that cause unfair competition between companies in Brazil, is the use of tax evasions to reduce the cost of products in relation to companies that comply with their tax obligations and, thus, obtain illicit competitive advantages", he observed .

In practice, he explains that certain taxpayers may be taxed differently from others, with the aim of leveling the tax burden (fiscal function), which would otherwise be unequal, thereby preventing any possible competitive imbalance (extra-fiscal function).

Taques said he continues to debate the proposal for the format of his report, which should be presented at the CAE until June this year.

Photos: Media News Portal
15.05.2013 | 17h46 - Updated on 15.05.2013 | 17:53 PM

Three questions for Hamilton Dias de Souza

The tax attorney and member of the ETCO Advisory Council Hamilton Dias de Souza gives details about the regulation of article 146-A, which entered into the Federal Constitution in 2003 to allow special taxation criteria to avoid tax competitive imbalances.

How can the regulation of article 146-A establish special tax criteria?

It is not the complementary law that will define the special taxation systems. It will only create the framework within which the Union, States and municipalities will be able to discipline these issues. Especially because, it is impossible to address this issue in the more than 5.500 municipalities that we have in the country. The work must be at the state or municipal level, where each one will create or deal with the matter according to their own legislation. It is worth remembering that article 146-A is not a standard that allows the collection of taxes. It is also not aimed at the interests of the tax authorities, but rather at protecting competition and the market.

Complementary law aims to prevent competitive imbalances from which source?

The complementary law aims to prevent imbalances caused by the taxpayer and not those caused by the tax authorities or by the tax rule. If there is a tax rule that, in itself, causes a competitive tax imbalance, it will be unconstitutional. It is, therefore, a matter of curbing deviations practiced by those taxpayers who, in one way or another, systematically fail to pay and hinder the market as a whole. They do not hinder the competitor, but the competition. Therefore, it is not a problem between individuals, but what is harmful to the market and the economy in general.

How to define criteria to establish the limit of tax incentives?

The limit, in my opinion, is that of free competition. If, through a tax incentive, a State reaches the point of affecting the market, it will inevitably be able to violate the principle of free competition, which is enshrined in article 170 of the Constitution. I am not against the incentive, but I believe that the parameters must be established by general clauses and this has to be verified in specific cases. If, at present, Confaz had a system capable of ascertaining the rationale of incentives, the definition could be more concrete and adequate.

Simplification of the tax system and law against unfair competition are discussed by experts

A meeting held by ETCO, in the last week of July, brought together representatives of the institute and the specialized press on the theme “Taxation and Business: Obstacle or Instrument for Development”. With the presence of tax attorneys Everardo Maciel and Hamilton Dias de Souza and the chief executive of ETCO, Roberto Abdenur, issues such as simplification of the tax system and regulation of article 146-A of the Constitution were discussed. 

Currently, the incidence of taxes accounts for 36% of the Brazilian Gross Domestic Product (GDP). This data alone should not cause so much concern, since, as is known, countries with a high level of development present even higher burdens. The issue becomes worrying when the tax burden is compared with the GDP per capita of these countries.   

    

The chief executive of ETCO, Roberto Abdenur, explains that "despite being vital for the country, the current tax system is considered as one of the main obstacles to economic development". Abdenur also highlights as one of the main impacts caused by the high tax burden on the economy, the increase in the cost of production in the industry, which discourages investments.

Data from the Federation of Industries of the State of São Paulo (Fiesp) show that, in Brazil, 64% of entrepreneurs point to the tax burden as a limitation of investments and 59% of them point to it as the main obstacle to innovation. The situation is even worse when this same load is assessed with the Human Development Index (HDI).

“While the Brazilian tax burden increased by 24,4% between 1994 and 2007, the HDI grew only 10,7%, which proves that the increase in taxes is not favoring the development of the population”, explains Abdenur.

Abdenur also mentions that, in Latin America, Brazil is the country with the highest tax burden. It is above Argentina (30,6%), which faces a long period of economic problems, as well as the region's average, which is 20,9%.

"By taking into account the bureaucracy of our tax system, according to a study by the World Bank, Brazil is also in a bad position," adds Abdenur. While in Switzerland - which has a similar load to that of Brazil - companies spend 63 hours to pay basic taxes, here the standard time is 2.600 hours, the worst in the world.

Former Federal Revenue Secretary and member of the ETCO Advisory Council Everardo Maciel presented one of the institute's proposals, whose main basis is to reduce bureaucracy.

For Maciel, there are some measures that can help in the process of simplifying and rationalizing the tax system. Among them is the unification of legal entities (CNPJ) in the federal, state and municipal registries. “We want to introduce this into the National Tax Code. It does not make sense for the same company to register in each of these units of the Federation ”, evaluates the former secretary of the Federal Revenue.

Another suggestion is that full anteriority be implemented. In other words, any change must have a deadline to be defined, which in the case of the ETCO proposal is until June 30 of the previous year. In the same vein, the institute suggests that the tax legislation for all taxes be consolidated by September 31.

The tax attorney and member of the ETCO Advisory Council Hamilton Dias de Souza presented the proposed regulation of Article 146-A of the Federal Constitution by means of a complementary law that may establish special taxation criteria, “with the objective of preventing competition imbalances, without prejudice to the competence of the Union, by law, to establish norms with the same objective ”. The intention is to allow states and municipalities to improve the competition of companies.

"This law does not create the criteria for taxation, but it allows the Union, States and municipalities to create them and it is up to a complementary law to create a framework for such taxes", explains Dias de Souza, who was one of those responsible for writing the article.

Regulation of Article 146-A: How to avoid inefficiency

 

In this article, Roberto Abdenur reinforces the urgency of regulating Article 146-A of the Constitution and draws attention to fundamental points so that the device does not become another simple collection instrument.

Roberto Abdenur, executive president of ETCO

Among the many factors that cause unfair competition between companies in Brazil, is the use of tax evasions to reduce the cost of products and, thus, obtain competitive advantages in the market. On December 19, 2003, the country took a major step towards eliminating this evil, with the publication of article 146-A, resulting from Constitutional Amendment 42/2003. Even today, the complementary law that is essential to regulate the adoption of tax measures necessary to consolidate a safe, healthy and ethical business environment is awaited.

For the time being, only the Federal Government has the competence to institute differentiated taxation systems in order to prevent competitive imbalances caused by the actions of companies that resort to reducing their tax costs to gain spurious competitive advantages. Since December 2003, states, the Federal District and municipalities have been waiting for the complementary law mentioned in article 146-A of the Federal Constitution to be issued so that they can create similar mechanisms applicable to the taxes within their competence.

The provision provides 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 agents competing in the market. .

The text of 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 establishment of special criteria, by means of the complementary law referred to in article 146-A, is essential, therefore, to avoid or resolve competitive imbalances. In practice, 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).

Due to the importance of the theme, ETCO has promoted debates over the years, which culminated in the realization, in 2010, of the seminar “Competition Tax Imbalance and the Brazilian Constitution”. Based on the conclusions of the seminar, the Draft Supplementary Law was designed to regulate Article 146-A of the Constitution.

It is essential that the complementary law is correctly formulated, under penalty of ineffectiveness of its provisions, or worse, of becoming just another collection instrument.

The proposed complementary law may resolve situations such as the anticipated collection of the taxable event. In other words, States will be able to charge ICMS in advance, in order to ensure competitive balance in markets that are more susceptible to tax evasion. Another situation that can be resolved is single-phase taxation. According to the tax substitution mechanism, taxes spread over a production chain (multi-phase) are collected at once, as if it were just a tax (single-phase). States already apply this mechanism, but there is no regulation and, therefore, each one does it differently.

In relation to the conflict of competences, the complementary law is vital. The Union already has the competence to regulate markets, but not States and municipalities, whose tax rules are only intended to collect. The complementary law will regulate the matter throughout the country, forcing states and municipalities to act to prevent competition imbalances. As for the minimum values ​​list, the jurisprudence refers to the illegality of adopting minimum values ​​as the basis for calculating taxes on goods and services. The complementary law will allow taxes to be based on market values, to combat fraud that is harmful to competition.

The importance of the complementary law does not stop there. There is also the question of specific rates. It has been increasingly common to create tax regimes in which the rate and calculation basis are merged, in order to charge a fixed amount per unit of merchandise. The complementary law will pacify the issue in relation to federal taxes and allow the use of specific rates by the States.

The complementary law will reaffirm the Union's competence to require the installation of weight, volume or flow meters. In order to make the differentiated tax regimes effective, it is necessary to impose the installation of equipment that allows the control of the quantity of goods traded by the establishment. Such requirements have been questioned, especially in terms of costs (SL 178 / DF).

Finally, two themes should have well-established rules based on the complementary law. Special tax calculation and inspection regimes may be instituted in specific cases and not only based on jurisprudence, which makes it impossible to subject taxpayers to individual different taxation and inspection regimes designed to avoid evasion due to violation of free competition and freedom of initiative. The complementary law will also make it clear that, in the case of sectors subject to a high tax burden, the suspension or revocation of a special registration is justified as a way of discouraging procedures aimed at gaining market through non-payment of taxes.

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Tax neutrality depends on the publication of a Complementary Law for almost a decade

Since December 2003, when Constitutional Amendment nº 42 was published, complementing article 146-A of the Constitution, the Complementary Law envisaged therein is expected to be published, which will allow special tax criteria necessary to combat the competitive imbalance caused by tax violations . The great challenge for 2012 is to ensure that this law is finally enacted and a healthier competitive environment is established in the country.

Historically, in Brazil, among the many factors that can cause unfair competition between companies in the same sector, is the use of tax subterfuge to reduce the cost of products and, thus, obtain competitive advantages in the market. In 2003, the country took a major step towards eliminating this evil, when, on December 19, art. 146-A, as a result of Constitutional Amendment No. 42. Nine years have passed and, since then, law-abiding companies have waited for the publication of the Complementary Law referred to in the article, while fighting in their daily lives to face disloyalty in competition.

Art. 146-A of the Federal Constitution says that "a complementary law may establish special taxation criteria, with the objective of preventing imbalances in competition, without prejudice to the Union's competence, by law, to establish norms with the same objective". In short, it is an authorization to establish special taxation criteria, which embodies the principle of tax neutrality, that is, that taxes should not cause effects contrary to free competition.

The provision foresees that the Complementary Law may establish parameters, to be observed by the Union, States and municipalities, for the creation of differentiated regimes of tax obligations in order to avoid or resolve competitive imbalances caused by the actions of individuals who use the tax to obtain spurious competitive advantages. "In summary, it allows new differentiated systems to be adopted by the Union, the States, the municipalities and the Federal District, when necessary to ensure that the tax burden is uniform for agents who compete in the market", explains Hamilton Dias de Souza, a tax lawyer.

Due to the importance of the topic, ETCO has promoted debates, over the years, which culminated in the May 2010 seminar on Tax Competition Imbalance and the Brazilian Constitution, in partnership with the Federal Magistrates School of the First Region. The conclusions of the event were synthesized and, based on them, the Draft Supplementary Law designed to regulate art. 146-A of the Constitution.

The chief executive of ETCO, Roberto Abdenur, points out that “it is fundamental and urgent to issue a complementary law that regulates art. 146-A so that we can create and preserve a healthy and fair business environment in our country ”. For him, "it is unacceptable that, almost a decade after the publication of the article, we are still living with such transgressions".

 

Taxes, competition and Article 146-A of the Constitution

Any tax interferes with the market. The tax burden impacts costs and can significantly change economic results. For this reason, the tax burden of agents competing in the market should, in principle, be uniform. If some are more costly than others, there will be artificial competitive advantage, since it does not result from greater efficiency. The precept of isonomy will then be wounded and, at the same time, the principle of free competition, damaging the exercise of free initiative, which is the foundation of the economic order.

It is the responsibility of the Public Power to take the necessary measures so that the tax is neutral in relation to the functioning of the market. This is what is called the “tax neutrality principle” which has two aspects: the negative and the positive. The negative aspect prevents the tax rule from being formulated in a way that privileges competitors (inequality in the law). The positive imposes the adoption of corrective measures aimed at making the tax burden legally established (inequality in the application of the law) effective.

Art. 146-A of the Federal Constitution is a rule designed to legitimize the production of tax rules aimed at achieving the positive aspect of tax neutrality. He says that "a complementary law may establish special criteria for taxation, with the objective of preventing imbalances in competition, without prejudice to the Union's competence, by law, to establish norms with the same objective".

This provision provides that a complementary law may establish parameters to be observed by the Union, States and Municipalities, for the creation of differentiated tax liability regimes in order to avoid or resolve competitive imbalances caused by the actions of individuals who use the tax to obtain competitive advantages. spurious. Competitive problems arising from non-tax causes or from government acts are outside the scope of the standard.

The special criteria are designed to make the correct payment of the tax feasible, when the general regime proves to be insufficient. Through them, some taxpayers are taxed differently from the others, however, with the objective of leveling the tax burden (tax function) that would otherwise be unequal, thus preventing possible competitive imbalance (extra-fiscal function). For example: if the normal IPI taxation regime, due to the value of the goods, presents application failures that compromise the regular functioning of the market, a special system of collection by fixed rates, which take into account, in its graduation, may be adopted. , the prices normally charged. In this sense, there is no breach of isonomy, but strict observance of the precept contained therein.

It must be made clear, however, that being instruments for the realization of tax justice, the special taxation criteria cannot be used in order to increase the tax burden.

Special taxation criteria can interfere with the elements of the main obligation (material criteria), or establish new ancillary obligations (formal criteria). The material criteria include: single-phase taxation, anticipation of the taxable event, fixed or specific rates, guidelines for minimum amounts. There are types of formal criteria: special inspection regimes, weight, volume or flow meters, proof of fiscal regularity, conditioning of non-cumulative tax credits to the payment of the tax in the previous transaction, special payment regime.

The elaboration of a complementary law that regulates art. 146-A of the Federal Constitution is of extraordinary importance for the preservation of a healthy business environment in our country. The complementary law will establish general rules defining, essentially, the special taxation criteria that may be adopted, the competitive imbalances that justify them and the conditions and limits to be observed in your institution. As a result, tax administrations will have uniform parameters to produce norms that tend to neutralize competitive advantages based on tax violations. Taxpayers, in turn, will be protected by the limitations to be established in order to avoid possible abuses, even if under the pretext of defending free competition.

Hamilton Dias de Souza, tax lawyer, and André Franco Montoro Filho, Ph.D in Economics from Yale University and professor at FEA / USP, are Advisory Advisers to ETCO.

Taxes, competition and Article 146-A of the Constitution

Source: Last Instance - São Paulo / SP - 15/12/2010

Any tax interferes with the market. The tax burden impacts costs and can significantly change economic results. For this reason, the tax burden of agents competing in the market should, in principle, be uniform. If some are more costly than others, there will be artificial competitive advantage, since it does not result from greater efficiency. The precept of isonomy will then be wounded and, at the same time, the principle of free competition, damaging the exercise of free initiative, which is the foundation of the economic order.

 

 

It is the responsibility of the Public Power to take the necessary measures so that the tax is neutral in relation to the functioning of the market. This is what is called the “tax neutrality principle” which has two aspects: the negative and the positive. The negative aspect prevents the tax rule from being formulated in a way that privileges competitors (inequality in the law). The positive imposes the adoption of corrective measures aimed at making the tax burden legally established (inequality in the application of the law) effective.

Article 146-A of the Federal Constitution is a rule designed to legitimize the production of tax rules aimed at achieving the positive aspect of tax neutrality. He says that “a complementary law may establish special criteria for taxation, with the objective of preventing imbalances in competition, without prejudice to the Union's competence, by law, to establish norms with the same objective”.

This provision provides that a complementary law may establish parameters to be observed by the Union, States and Municipalities, for the creation of differentiated tax liability regimes in order to avoid or resolve competitive imbalances caused by the actions of individuals who use the tax to obtain competitive advantages. spurious. Competitive problems arising from non-tax causes or from government acts are outside the scope of the standard.

The special criteria are designed to make the correct payment of the tax feasible, when the general regime proves to be insufficient. Through them, some taxpayers are taxed differently from the others, however, with the objective of leveling the tax burden (tax function) that would otherwise be unequal, thus preventing possible competitive imbalance (extra-fiscal function). For example: if the normal IPI taxation regime, due to the value of the goods, presents application failures that compromise the regular functioning of the market, a special system of collection by fixed rates, which take into account, in its graduation, may be adopted. , the prices normally charged. In this sense, there is no breach of isonomy, but strict observance of the precept contained therein.

It must be made clear, however, that being instruments for the realization of tax justice, the special taxation criteria cannot be used in order to increase the tax burden.

Special taxation criteria can interfere with the elements of the main obligation (material criteria), or establish new ancillary obligations (formal criteria). The material criteria include: single-phase taxation, anticipation of the taxable event, fixed or specific rates, guidelines for minimum amounts. There are types of formal criteria: special inspection regimes, weight, volume or flow meters, proof of fiscal regularity, conditioning of non-cumulative tax credits to the payment of the tax in the previous transaction, special payment regime.

The elaboration of a complementary law that regulates article 146-A of the Federal Constitution is of extraordinary importance for the preservation of a healthy business environment in our country. The complementary law will establish general rules defining, essentially, the special taxation criteria that can be adopted, the competitive imbalances that justify them and the conditions and limits to be observed in your institution. As a result, tax administrations will have uniform parameters to produce norms that tend to neutralize competitive advantages based on tax violations. Taxpayers, in turn, will be protected by the limitations to be established in order to avoid possible abuses, even if under the pretext of defending free competition.

Launch

Today, 15/12, starting at 19:30 pm, ETCO launches, at MAM, the book “Tribute to the Market, Competitive Imbalance and the Constitution, Um Debate”, a work that reports the points discussed in the Seminar “Competitive Tax Imbalance and the Constitution Brasileira ”conducted by ETCO in May to discuss Article 146-A of the Constitution.

Oscar Pilagallo translates into journalistic language all the richness of the debate held at the Seminar, which was attended by:

* André Franco Montoro Filho, chief executive of ETCO;

* Everardo Maciel, former secretary of Receita Federal and ETCO advisor;
* Hamilton Dias de Souza, specialist in Tax Law;
* Humberto Ávila, specialist in Tax Law;
* Luís Eduardo Schoueri, professor of Tax Law at the Faculty of Law of the University of São Paulo;
* Luiz Fux, Minister of the Superior Court of Justice (STJ);
* Marcílio Marques Moreira, former Minister of Finance and president of the ETCO Consultative Council;
* Mariana Tavares de Araújo, Secretary of Economic Law;
* Otacílio Cartaxo, secretary of Federal Revenue;
* Rafael Favetti, executive secretary of the Ministry of Justice;
* Tércio Sampaio Ferraz Júnior, professor at the Faculty of Law of the University of São Paulo.

 

Service

Launch of the book “Tribute to the Market, Competition Imbalance and the Constitution, Um Debate”

Author: Oscar Pilagallo

Date: 15/12/10, Wednesday

Place: São Paulo Museum of Modern Art (MAM)

Address: Ibirapuera Park, gate 3, no number, São Paulo, SP