Taxpayer rights and tax justice

For a long time, a tax reform has been defended that is structuring of a model that makes fiscal and tax justice feasible, that is, that reduces social inequality and incorporates some principles, such as efficiency, equity, simplicity, stimulating competitiveness and combating those who pervert the system, not paying taxes intentionally. For this purpose, it is important to value the taxpayer and curb what we call “constant debtor”, so that the taxes collected are destined to meet the demands of society and that the State receives what is effectively due, nothing more.

However, it is feasible — before we achieve a tax reform that deserves the name — to have legislation that simplifies the system, combating deviations and facilitating collection. The Brazilian Institute of Competition Ethics — ETCO, has, since its foundation in 2003, contributed with technical studies, presenting suggestions for the improvement of relations between the tax authorities and the taxpayer. We identified that it is urgent to remove inaccuracies that encourage litigation, causing damage to both parties. The taxpayer wants its tax regularization and the treasury needs to receive it, however, these objectives are not achieved in the face of the troubled system in force. The taxpayer cannot be treated as an enemy and the tax authorities as an executioner.

In 2019, to present the serious situation we face, ETCO contracted an international study with the consultancy EY dealing with the tax litigation. A bleak picture was presented, nothing comparable with other countries: at the federal level alone, around R$ 3,4 trillion were being discussed in administrative and judicial instances. To face this debacle, we point out, looking to the past, the need to improve the tax transaction and, for the future, the adoption of mediation and tax arbitration. For the first situation, we stimulated this discussion in seminars with the PGFN and tax lawyers and, at the initiative of the federal government, Law 13.988/2020 was approved, which was reinforced by Law 14.375/2022. These provisions and the action of PGFN resulted in clear advances, allowing the solution of old pending issues. The taxpayer regularizes himself and the tax authorities collect. With regard to mediation and arbitration, we have bills in the States and in the National Congress, which should advance.

Validating the expression “separating the wheat from the chaff”, while we defend a new tax-taxpayer relationship, reducing the endless and harmful disputes to those who act in good faith, we need to fight those who take advantage of the existing confusing situation for the collection of taxes and if benefits, by structuring its actions to never pay taxes, the aforementioned “constant debtor” who has active debts with the federal tax authorities of R$ 100 billion, only in the fuel and tobacco sectors. We have a Bill in the Federal Senate (PLS 284/17) defining who should be considered a persistent debtor, differentiating them from occasional debtors and even repeated ones. It is in plenary and, without a reason that can be understood, is not voted on.

The most recent ETCO initiative is a new international study with the consultancy EY — which is in its final phase — dealing with taxpayer rights, presenting a diagnosis of our constitutional and infra-constitutional legislation and evaluating the posture of countries with the best practices (USA, Germany and Australia). The objective is to measure, as we did in the study of litigation, how the taxpayer is treated and what suggestions can be made to guarantee rights and define duties, with the objective of establishing a new level in this relationship, today of animosity, for an attitude of greater understanding and accuracy of the obligations, which is in the interest of the State and of citizens in good faith.

Thus, we must, for example, combat possible abuses, such as the normalization of tax representation for criminal purposes and the application of fines increased by up to 150%, without criteria.

This work by ETCO found in 17 / 2022 Bill, authored by Deputy Felipe Rigoni, demonstrating how important this initiative is to achieve a balance in more citizen-oriented coexistence in the fiscal sphere. That must be the goal.

At the public hearing held by the Finance and Taxation Commission of the Federal Chamber, ETCO demonstrated that PL 17/22 should consolidate taxpayer rights without inhibiting the legitimate action of the tax authorities. This bill should not be seen as a measure against the tax authorities or against fiscal presence, in fact, for the exercise of this action it is the duty of the public agent to defend rights and define duties. In this sense, the reduction of litigation; the valuation of good faith, support the composition before the imposition of penalty, allowing the taxpayer to point out facts and documents are measures that, far from defending tax evaders, demonstrate a sense of respect for citizens and companies, for the benefit of the work of inspection, which does not aim to punish, but to collect what is fair. It is important to point out that the countries that contributed to the ETCO/EY study, recognized as rigorous in the efficient fight against tax evaders, encourage the defense of taxpayers. The US, for example, has the “Taxpayers Bill of Rights”. Once the tax and its value are defined, the tax authorities' action is strengthened.

Of course, the bill can and should be improved, but it is not credible that it will be discredited. This stance removes seriousness from criticism. Why don't we have a law that guarantees taxpayer rights and points out duties and that, once established, are fulfilled?

In order to strengthen legal certainty, it is necessary that we have, on the one hand, the exact definition of the tax due, simplifying its payment and the efficiency of collection, avoiding excessive litigation and, on the other hand, a law that combats tax evaders and persistent debtors.

This is the path that should represent advances in the search for tax justice, even before we reach an effective tax reform.

*Edson Luiz Vismona is a lawyer, president of the Brazilian Institute of Competition Ethics (ETCO) and of the National Forum Against Piracy and Illegality (FNCP). He was secretary of justice and defense of citizenship of the State of São Paulo (2000/2002)

You won't see any country

Culture must always be valued. Poetry, literature, music artfully express the feeling of a people and arouse emotions, giving meaning to situations that reason often cannot understand.

On my last article I used Grande Pessoa to address the issue of ethics (To be great, be whole). In this I rely on Ignácio de Loyola Brandão, in his work “No Verás País None”, to express a touch of perplexity at the latest events that haunt our beloved and suffering Brazil.

There are so many that I would have to write much more than the space I'm given allows. I will limit myself to two themes that exemplify some of the hardships that I follow closely.

We are aware that  to achieve the desired development, we must ensure legal security that allows for the attraction of investments, the generation of jobs and income. However, far from advancing in this goal, we are moving away from this goal every day. With effort, dedication and a lot of competence, we are going backwards.

Let's see the tax issue: there is always talk of the urgent need to have a "tax reform" that improves our system, is broad and simplifies the fulfillment of obligations and, of course, does not raise taxes even more.

These complex objectives will only be achieved with a broad debate, with the participation of experts in the intricacies of tax law, businessmen, taxpayer representatives, governments, civil society, politicians and that there is a meeting of accounts, all to assess the consequences, risks and the scope of the measures that will be adopted.

But here comes a package that, far from the necessary caution, promotes severe changes in the tax structure: it alters income taxation; dividends; of retained earnings; non-deductibility of interest on equity; it generates new bureaucratic procedures and will increase the tax burden, burden productive investments and, of course, in the end, consumers.

With a strong reaction from industry, commerce, services, liberal professionals, states and municipalities, opinions were presented by the rapporteur, further confusing what is incomprehensible. It's the "puxadinho" logic. Result: unanimous and cohesive repulsion, contrary to the saying that claims to be “dumb unanimity”.

But everything can get worse. The Federal Chamber decides that this matter must be voted on as a matter of urgency! Impairing a deeper discussion, with studies and technical debates.

Taxpayers and productive sectors were run over. The political logic moves away from society, with populist justifications.

Beside this unusual situation, I point out another absurdity. The Executive Branch proposes a Provisional Measure to profoundly change the structure of fuel distribution. On the one hand, allowing the direct sale of ethanol by the mills to service stations and on the other, authorizing the sale of fuel from a different source than that indicated by the banner of the service station. Hasty and inexplicable proposal.

The simple justification is illusory, the price will fall and the consumer will benefit, as if it were possible to reduce the final price without changing the tax structure that focuses on fuels. These misconceptions will encourage non-payment of taxes, a practice that plagues the entire industry.

It will be very difficult, if not impossible, to oversee the distribution chain and, in the case of the sale of a product different from that of a service station, the consumer will be deceived, as they will have the belief that they are supplying a product from a brand they trust and will receive something that does not know the origin.

This amazing initiative, which is applauded by persistent debtors, has never been defended by the industry nor by consumers. A real mistake.

Some questions: How urgent is it for such a disruptive action to be presented via MP? What are the real interests that motivate it? Have the risks been assessed?

These two examples of sudden legislative proposals remind me of Hugo Carvana's film, starring the late Tarcisio Meira, with the title: “Don't worry, nothing will work”.

Hard times. There are methods in these measures, which burden those who contribute and, without validation in studies, do not meet the legitimate interests of society, the consumer, the productive sectors, in short, those who support the State. And all this in the midst of a pandemic, high interest rates and inflation, high unemployment, institutional split, with the holders of powers in clear confrontation.

We lost the sense of planning, of priority, of doing what really matters and establishing a clear divorce between society and the state. By planting erratic rules, we reap more legal uncertainty.

As a lawyer, I am optimistic, but I have to be realistic. Yes, if we stick to this route, nothing will work and we won't have any country, at least not what we want.

Art has made its warnings, we have to listen and react.

*Edson Luiz Vismona is a lawyer, president of the Brazilian Institute of Competition Ethics – ETCO and the National Forum Against Piracy and Illegality – FNCP. He was secretary of justice and defense of citizenship of the State of São Paulo (2000/2002)

**This is content from Bússola, a partnership between FSB Comunicação and Exame. 

ESG: capitalism beyond profit

We have seen, with increasing prominence, in the stock market and in the Brazilian corporate environment the acronym ESG, which represents indicators that guide investors in assessing the conduct of companies in areas considered strategic: environmental, social and governance (environmental, social and governance).

Thus, the initiatives that companies should encourage to demonstrate that their actions are guided by respect for the environment are pointed out; the adoption of social policies that involve the internal positions of inclusion and coexistence of employees; for the relationship with the community; and also through corporate decision-making processes, encouraging the adoption of values ​​related to control, dignity, ethics, transparency and legality. With a focus on these actions, companies can attract funds allocated to global investment funds, which turn over trillions of dollars.

This movement was encouraged in 2015 by the UN World Development Agenda (Global Agenda 2030) - a commitment signed by 193 countries, including Brazil - determining the joining of forces in favor of a World Sustainable Development Agenda, which must be fulfilled by the year 2030, contemplated in 17 Sustainable Development Goals, which were divided into 169 goals.

The objectives range from poverty eradication, health and well-being, education, actions against climate change, clean energy, decent work and economic growth, to reducing inequalities, peace, justice and effective institutions. A list of actions of this magnitude, divided into 169 goals, could be considered as another utopia within the scope of the United Nations, which would remain on the plane of duty, without an effective application.

However, these objectives attracted the attention of global investors who understood that companies could not be left out of this process, the demands, the expectations of society have changed, demanding more strongly that this agenda be for real and that it involves governments, NGOs and the sectors productive.

Today it is normal for a company, which does not need to be large, to demand investments, to be asked whether it meets the goals of the UN Agenda 2030. The so-called responsible investment funds already handle 31 trillion dollars, which represents 36% of the total financial assets managed in the world.

ESG indicators involve topics of great importance, however, I note, in the journalistic articles that have been explaining these indicators, that the “E” (environmental) has been highlighted in greater detail, to the point of “S” and “G” being in second plan. In fact, diversity and inclusion actions have assumed relevance, as have integrity programs, but the attention that is presented in the reports has been more focused on the environmental issue.

Initiatives to increase the participation of women in Boards of Directors; inclusion of professionals from different backgrounds, cultures, genders and races; combating harassment; encouraging actions to respect the consumer, with the adoption of ombudsmen; the development of integrity programs and the fight against any illegal practice represent the evolution of concepts and principles of the corporate environment. Thus, the points related to Social and Governance should also be highlighted, composing a balance between the desired indicators, since they represent a whole that should not be dissociated.

This evolutionary sense is very interesting. The investor's objective is the profitability achieved by the profit, however, this goal, increasingly, cannot be achieved at any cost. Society and consumers demand new postures from companies, which must meet ESG commitments that go beyond basic profitability postures: low cost, high productivity, attractive price, logistics, sales channels, marketing policy, tax adequacy.

UN Secretary General Antonio Guterres said that the “Global Agenda 2030 is our Global Declaration of Interdependence”. I dare to affirm that, with this advance stimulated by investment funds, this Agenda represented a meeting that recently could be considered unusual: capitalism with human rights, enabling the generations of Human Rights to be inserted in the strategic vision of companies. Certainly a necessary stimulus for renewal and innovation, with inclusion, compliance and sustainability.