Senate Bill provides for combating persistent debtor

At the moment when the implementation of a new Refis, for the renegotiation of companies' debts, is being evaluated, the discussion about the search for compensatory measures arises.

In this sense, there is an initiative ready to be voted by the plenary of the Federal Senate that will allow the combating the debtor, which bleeds the federal coffers in the order of R$ 14 billion a year, just in the fuel market. It is PLS 284/17 that provides, among a series of measures, for the objective distinction between debtors: the eventual debtor e the reiterated debtor (who will not be affected by said PLS) and the persistent debtor, this yes, must be fought, therefore, it is structured intentionally to not pay the taxes due.

To get an idea of ​​liabilities, also in the fuel sector, active debts reach R$ 70 billion. Which corresponds, for example, to 8% of the GDP of Minas Gerais last year.

O PLS 284 / 17 was reported by Senator Fabiano Contarato (PT-ES) and was approved by several commissions and now it only depends on the President of the Federal Senate, Rodrigo Pacheco (PSD-MG) to move forward and be guided. The delay in approving this project encourages the stubborn debtor, harming public coffers and society as a whole.

For the president of ETCO (Brazilian Institute of Ethics in Competition), Edson Vismona, who follows the course of the agenda in Congress, the great challenge of the Brazilian legal system is distinguish the defaulter from the defaulter. “Contumacious is not a taxpayer, he is a criminal, as he practices fraud in the exercise of his activities. Delinquents, on the other hand, want to be up to date, but due to different circumstances they are unable to meet their tax obligations, this one deserves the government's attention and encouragement for its regularization, on the other hand, persistent debtors must be rejected”, he says.

Contumaz contumaz: succession of programs harms the good taxpayer

It is undeniable that the Brazilian taxpayer, legal entity or individual, faces a real tangle of laws, decrees, acts and normative regulations related to taxes, which makes it difficult to understand the intricate tax process, generating growing dissatisfaction for taxpayers who wish to fulfill their obligations. , increasing the juridical insecurity which particularly harms the business environment and the attraction of investments.

Study sponsored by Brazilian Institute of Competitive Ethics (ETCO), carried out by the international consultancy EY, shows that we are discussing in the administrative and judicial instances, only in federal debts, 3,4 trillion reais. When debts are added in the state and municipal spheres, the estimates point to more than 5 trillion reais!

In addition to this unusual situation, which harms good taxpayers and also the treasury, we still have a Tax Burden highest in comparison to countries of the same level of development, burdening companies and the whole of society. We pay a lot and have a low return on services. An anachronistic situation.

This reality increases defaults and, in view of the permanent need of the Tax Authorities to increase the collection, stimulates the institution of Federal Tax Debt Installment Programs, popularly known as Refis. It is not without reason that since the year 2000 we have had at least five of these initiatives in general. On average, every three years we have a program with this profile.

The succession of installments has been criticized by experts in the tax area. Among other arguments, the following can be highlighted: reduced tax collection, with an increase in tax liabilities; inefficiency; disruption of the system, stimulating default in anticipation of the approval of a new installment plan; discouraging taxpayers who comply with their obligations; illegitimate use by those who use non-payment of taxes as a business model.

Without deepening criticism, the moment we live in, with the pandemic draining public resources, from companies and people, is at stake the survival of the entire economy. In the face of the tragedy that enters the second year, the initiative of the President of the Federal Senate, to have a new tax regularization program finds fertile ground, which is easy to justify.

An instrument that can serve both sides of the tax relationship - streamline the payment of taxes, which is extremely necessary for a relief to the treasury and improve the situation of taxpayers hard hit by the shock caused by the tragedy of the covid-19.

However, as has already happened in other Refis, it is necessary not to forget those who are always on the prowl to take advantage of worthy purposes, to support the taxpayer in difficulty, to obtain advantages in order to continue to harm the tax authorities and fair competition. These are the so-called persistent, “smart” debtors who set up their business by structuring it so that they will never pay taxes. He is not a taxpayer who is in difficulty or who, facing a more serious economic situation, repeatedly fails to fulfill his obligations. He is persistent, his very high profit is the result of recurrent tax evasion, eroding competitiveness and competitive ethics, causing billionaire losses to the tax authorities and therefore to society. This structured default, in the fuel and tobacco sectors alone, accumulates active debts of 100 billion reais.

It is crucial to combat this predatory practice. With this objective there is the bill in the Federal Senate (PLS nº 284/2017), ready to be voted, which defines who should be considered a regular debtor. This law will provide greater legal certainty in tax relations, reducing the scope for the performance of organized actions of continued tax evasion.

Thus, in this dramatic moment, the proposal for a restructuring of tax debts cannot be a stimulus for spurious behavior on the part of those who take advantage of legitimate measures to once again become involved.

The Brazilian legislature must pay attention to this reality and not allow a legitimate initiative to be distorted.

For this reason, the reopening of yet another Special Tax Regularization Program (Pert) should not include debtors who have been excluded from two or more tax debt installment programs.

Transaction, reform and division of debtors: solutions to tax litigation

Facing the lack of control of Brazilian tax litigation, which today already reaches a magnitude equivalent to 73% of the country's Gross Domestic Product (GDP), according to Insper data, must necessarily undergo a profound transformation on numerous fronts of the national tax system.

In a webinar held by Casa JOT in partnership with Brazilian Institute of Competitive Ethics (ETCO) this Friday (16/10), experts and authorities listed some of the priorities that can help reduce these disputes.

Among them are the initiative of the Attorney General of the National Treasury to tax transactions, which until August this year negotiated R $ 28 billion in debt. Speakers also stressed the urgent need for comprehensive tax reform, as well as ensuring that stubborn debtor the eventual debtor and the good and bad taxpayer.

João Henrique Grognet participated in the webinar; General Coordinator of PGFN's Credit Recovery Strategy; Breno Vasconcelos, lawyer and researcher at Insper; Zabetta Macarini Gorissen, executive chairman of the Group of Applied Tax Studies (Getap); and Ana Amélia, former senator.

It was a consensus, and it is not new, that the major and main problem lies in the complexity of the tax collection system. “There is no rich country without a legal model that guarantees predictability and security. It's impossible. And tax litigation is generated by unpredictability. How does the taxpayer and entrepreneur do to navigate in an environment so difficult to predict? ”, Said Breno Vasconcelos.

According to the lawyer, there are some factors that increase this insecurity: possibility of retroactivity in new interpretations, absence of acts that register what is the formal and official interpretation of the new tax rule, absence of effective consultation processes, the excessive duration of the processes, which today it takes an average of 19 years to complete, and the uncertainties arising from new technologies. "These are those indicated by the OECD as factors of legal uncertainty and Brazil boasts all of them", pointed out Vasconcelos.

Former senator Ana Amélia cited as an example of the complexity in collecting taxes the reality of a Brazilian businessman, Jorge Gerdau Johannpeter, of the Gerdau Group, which has a steel company in Rio Grande do Sul and another one in Canada. “In RS, he has 250 professionals for the tax area just to meet the almost daily changes. To do the same job in Canada, he needs only 3 people ”.

“This illustrates with crystal clarity the situation we are experiencing. And the foreign investor, when looking at our country, he sees not only the question of competition, but also these archaic structures that we have ”, he added.

For Zabetta Gorissen, in the last four years, Brazil has intensified its critical understanding of tax litigation, with an attempt to bring together taxpayers, the government, the National Congress and the Judiciary. "Unfortunately, litigation has become a multifaceted problem that affects everyone too much," he said.

Read also Brazilian tax litigation exceeds 50% of GDP

In this sense, the president of Getap mentioned the development of mechanisms for cooperative compliance, always focused on bringing taxpayers closer to the taxpayer to more easily solve the problems faced. Zabetta also drew attention to “the great milestone” brought by tax transactions, which are a renegotiation instrument for the extinction of tax credit.

According to data presented by João Henrique Grognet, General Coordinator of Credit Recovery Strategy at PGFN, the renegotiation of R $ 28 billion in debts reached 77,4 thousand contributors and 275 thousand registrations grouped in agreements.

“It seems to me that it was very correct, with wide advantages in the Tax Court. This Justice is good in any case, but we were not finding that clarity in the previous Refis programs. After all, you give discount to those who don't need it, ”said Grognet.

According to Zabetta, a point that needs improvement in the tax transaction involves the fact that Law 13.988 / 20, which instituted the program, established a limit on the payment litigation transaction of 50% of the debt amount. “Setting this limit may slightly restrict society's appetite for this modality. But, as we always said, let's wait ”.

Expectations for tax reform

The challenge of facing tax litigation is great, but in the view of experts and authorities, this scenario will only really change after the tax reform.

“None of this will be resolved if we only work on litigation. We need to work at the source. Litigation is a symptom, not a problem in itself. It is born out of an extremely complex system, full of exceptions. Substantial tax reform is essential for Brazil to emerge from this dysfunctional and counterproductive scenario, ”said lawyer Breno Vasconcelos.

At first, these changes do not automatically mean that a new dispute will not arise, since there will be completely new legislation in force. In the view of Zabetta Gorissen, society should pay “absurd attention” so that the proposals in progress in the National Congress come out with the best possible text and eliminate the largest amount of litigation possible.

“If there is a dispute, we have to immediately go back to Congress and fix it. We are not going to do what we do today. If it doesn't work right away, you have to change the legislation, ”he said.

Stubborn debtor

For ex-senator Ana Amélia, author of the Senate Bill No. 284 / 2017 to characterize the frequent debtor, the more complicated a country's tax system is, the easier it is to evade.

“In this project, we are separating two natures from the taxpayer: one that has as a religion its duty consistently, duty by profession, duty by belief. It is a form of tax evasion. It is a springboard for tax evasion ”, he said, adding that the intention of the PL is to treat taxpayers who have different behavior differently.

The former parliamentarian cited that the characterization of this type of debtor generated a fight within Congress and, because of this legislative vacuum, the Supreme Federal Court (STF) entered the debate. In December of last year, the Court established a thesis in order to criminalize the incumbent debtor, as long as there is evidence of appropriation.

“The STF made a judgment raising the penalty for the stubborn debtor in prison. In our case it was a fine, which had a lot more educational significance than the criminal issue. The Court gave a much heavier treatment than what we intended in the law, ”said Ana Amélia.

Cancellation of registration of defaulting smoking companies back on the STF's agenda

 

The Supreme Federal Court (STF) again discusses, this Thursday (17/9), the possibility of canceling the registration of smoking companies due to the non-recurring payment of taxes. This is one of the most important issues among those guided by the new President of the Court, Luiz Fux, until the end of the year.

In September 2018, the plenary of the Supreme Court addressed the issue. Eight ministers understood the revocation of registration to be constitutional, but, at the time, there were three different lines of reasoning or argument aligned with this view.

In view of the complexity of the discussion in a case that has been pending before the Court for 13 years and has already accumulated eight volumes, Minister Carmen Lúcia, then President, postponed the announcement of the result. Now, the expectation is that Cármen Lúcia's vote will be understood as the medium and give the contours to the proclamation.

The direct action of unconstitutionality (ADI) 3952 came back to the plenary agenda on October 19, 2019 and March 12, 2020, but ended up not being proclaimed. In view of the repeated postponements, the Court began to receive requests for the proclamation to be concluded soon.

The lawsuit, filed by the Christian Labor Party (PTC), challenges the “summary cancellation” by the Federal Revenue of the special registration of tobacco companies when there is a default of federal taxes. The party claimed that the restriction to the exercise of lawful economic or professional activity would constitute a political sanction prohibited by the Constitution, insofar as it does not admit the existence of “oblique instruments” to coerce or induce the taxpayer to pay taxes.

In summary, it claimed that Article 2 of Decree-Law No. 1.593 / 77, as amended by Law 9.822 / 1999, would violate the constitutional principles of due legal process, wide-ranging defense, contradictory, presumption of innocence, freedom initiative and proportionality. According to the party, the sanction imposed on cigarette companies would not achieve the desired end, which is the payment of taxes or contributions.

Edson Vismona, executive president of the Brazilian Institute of Ethics in Competition (ETCO), which is amicus curiae in the lawsuit, argues that, in fact, impeachment is an appropriate measure for those who, according to him, structure an enterprise in order to harm the Tax authorities to profit. To the extent that they do so, there should be no possibility of recovering the tax due.

“It has debtors with debts of millions. The corrosive action of the heavy debtor is very clear. And you can no longer delay. And that is the preferred verb of the debtor. he exists to delay, to have no decision, to forfeit and he remains free and free, to continue to evade. Cassation is important because it prevents the continuation of a criminal offense and affects all competition ”, emphasizes Vismona.

Contumable debtor is the company that claims to have a tax debt, but in a repeated and premeditated way does not act to settle it. As the entrepreneur does not evade, he just does not pay the tax due, in theory, he does not commit a crime. But, it leaves the competition behind, since the non-payment of taxes positively impacts the price of the products, which are artificially cheaper.

The work to recover the amounts due is, according to Vismona, herculean. And over time, it tends to get even more difficult. “It is an ongoing process for the tax authorities. The cassation does not prevent the action from being repeated, because these groups open new CNPJs, they have a structure around that. But we have to surround them, reduce the space they have. ”

The final definition of ADI 3.952 consolidates an important precedent and, in ETCO's view, strengthens the work of Congress to legislate on combating persistent debtors. Two bills in process in Congress contain criteria to detect and punish companies that use this practice: PLS 284/2017 and PL 1646/2019. The first, for example, differentiates the incumbent debtor from the eventual - just one of the concerns of those who follow the debate. But in Parliament, the discussion is stopped.

The constitutionalist lawyer and professor at the State University of Rio de Janeiro (Uerj) Gustavo Binenbojm works in the cause for the Tobacco Industry Union in the State of Rio Grande do Sul (Sindifumo-RS). According to him, "the cassation takes place in the face of the special circumstance that this is an industry that the taxation is so high that it is not enough for the tax authorities to have at their disposal the traditional instruments for collection, attachment of assets".

In these cases, evaluates Binenbojm, what we have is the constitution of companies that live off tax evasion and “through it distort the market because they offer values ​​much lower than those economically viable for fair competition”.

Thus, the commercial damage caused by the action is irreversible. In this context, the fact would not fit into the jurisprudence of the Supreme Court of not allowing what is called a political sanction. As a rule, extra-fiscal effects are not allowed for non-payment of tax. But in this case, the understanding is that the State has no other means to combat the practice.

“Law works based on reality. It is not a philosophical abstraction. The argument that if you close the company, right there is that you will not be able to pay does not arise with companies that open and close and create new CNPJs to practice the same illegal act. The only way to stop bleeding and prevent further damage is to prevent the action from continuing, ”he said.

Binenbojm recalls the case where the Supreme Court authorized arrest for ICMS debt declared but not paid. “Now it does not involve deprivation of freedom. But the person's right to engage in economic activity or not. If the STF validated the arrest, much more serious, for a greater reason it must validate the revocation of the registration of companies with an inherently unlawful intention ”, he points out.

At the end of 2019, the plenary of the Supreme Court, by seven votes to three, defined the thesis that the taxpayer who fails to collect the ICMS practices crime as long as there is intent and in a persistent manner. On that occasion, the Court judged RHC 163.334 filed by the owners of clothing stores in Santa Catarina denounced for not collecting ICMS between 2008 and 2010. The vote of the rapporteur, Minister Luís Roberto Barroso, which included the criterion of contumacy for the construction of the proposed thesis - changing the initial suggestion, without the expression.

Voting chains

The trial started in 2010 and was suspended after Cármen Lúcia's request for a view. On the occasion, the rapporteur, Minister Joaquim Barbosa, voted for the partial provision of ADI, in order to give the contested normative provisions an interpretation according to the Federal Constitution, establishing the following conditions for the revocation of the registration of companies to take place: analysis of the amount of tax debts not paid off; meeting the due tax administrative process in assessing the enforceability of tax obligations and examining compliance with the due legal process for applying the sanction.

Cármen Lúcia accompanied Barbosa. According to the minister, this interpretation "equalizes the principles of free legal economic initiative, free competition, reconciling with the guarantee of the due tax legal process and the non-avoidability of the jurisdiction, with the taxpayer's duty to fulfill his tax obligations". Minister Rosa Weber and Minister Celso de Mello accompanied this same understanding.

Minister Alexandre de Moraes defended that the company should continue functioning until the secretary of the Federal Revenue Service judges the appeal presented by it. Thus, he voted to exclude the expression “without suspensive effect” in paragraph 5 of article 2 of the rule, maintaining the rest of the law. According to the minister, the rule, with the changes made by the new legislation (Law 12.715 / 2012), provides for the conditions proposed by the action's rapporteur. Ministers Ricardo Lewandowski and Gilmar Mendes followed the current opened by Moraes.

A third line was opened by Fux. He affirmed that the legislator's option must be obeyed and voted for the rejection of the request. "If the legislator understood that the measure has to be severe, he has better expertise than ours to know if a suspensive effect does not postpone an illegal activity". In addition, for Fux, the measure to cancel the registration does not permanently impede the company's economic activity, which can be established as long as the legal requirements are met. “Freedom of initiative when exercised in an abusive manner no longer deserves the protection of the legal system”, he concluded.

The only one to vote for the total validity of the PTC request, and consequently against the constitutionality of the impeachment of company records, Minister Marco Aurélio stressed that the contested rule compels the company liable to pay the tax, regardless of the amount due, to the satisfaction of the tax debt . “The precept does not refer to eventual, repeated or repeated debtor, there is no distinction. The attacked device is content to arrive at this extreme act of forfeiting the registration, with pure and simple default, ”he said.

Ministers Dias Toffoli and Luís Roberto Barroso declared themselves impeded and Minister Luiz Edson Fachin did not vote for having assumed Barbosa's chair.

Stubborn debtor: lack of specific law maintains practice without punishment

Brazilian law does not have a definition on what is a persistent debtor. Therefore, the fight against criminal tax evaders it always comes up against the ability to impose sanctions on those who adopt the practice systematically in order to have competitive advantages. The sectors in which there are more regular debtors - who purposely fail to pay taxes - are fuels, cigarettes and beverages, highly regulated by the State.

Two bills in progress in Congress contain these definitions of the figure of the debtor who is a debtor: the PLS 284/2017 and the bill 1646/2019.

For specialists heard by the JOT, defining clearly what characterizes a persistent debtor is fundamental. “The regular debtor takes advantage of himself to hide behind a lot of legal questions,” says Guilherme Barranco, a partner at Barranco Sociedade de Advogados and a former adviser to Carf. "The less precise the criteria are, the more he can object in court to say that he is not a regular debtor."

PLS 284/2017 defines a persistent debtor as one who acts in the field of illicit acts, "he is a criminal, and not a businessman, who organizes himself in order not to pay taxes and thereby obtain a competitive advantage".

The executive president of the Brazilian Institute of Ethics in Competition (ETCO), Edson Vismona, considers PLS 284/2017 to be the best project to combat the persistent debtor. “It brings the difference between what is a debtor and a possible debtor and gives legal certainty for the use of the term 'debtor',” he explains. “Legal certainty is fundamental and the law is exactly in that sense. The bill is ready, but stopped, that's the problem ”.

The most recent opinion, of 2018, made by the ex-senator Ricardo Ferraço (PSDB-ES), establishes measures to combat the debtor contumazado in the federal, state and municipal spheres. As examples of possible sanctions against offenders, the opinion cites: suspension or cancellation of tax registration; loss of registration for operation; interdiction of the establishment; application of special inspection and collection regimes. Currently, the project rapporteur is Senator Rodrigo Pacheco (DEM-MG).

“The law is a good step, because today the environment is without definitions, cloudy. And everything that is foggy in this high tax environment these regular debtors use for their benefit ”, highlights Luciano Godoy, partner at LUC Advogados, arbitrator and lawyer specialized in litigation.

PL 1646 / 2019

Another bill, PL 1646/2019, which has a smaller amplitude in relation to the Senate text. “1646 is being called a debtor's project. But there are four articles that talk about the debtor and the rest of the project talks about the modernization of the collection of the active debt of the Union ”, says the tax lawyer Guilherme Barranco.

The bill defines a frequent debtor as “one whose performance goes beyond the limits of default and is located in the field of illegality, with serious damage to the whole society”. The text also establishes that the “substantial and repeated” default of taxes will be configured when it is found that there are debts of an amount equal to or greater than R $ 15 million for one year, on behalf of the debtor himself or of a member of the economic or family group. . “In the tax sphere, especially with larger companies, it is very easy to have debts above R $ 15 million”, points out Barranco.

Supreme

Last year, the plenary of the Federal Supreme Court, by seven votes to three, defined the thesis that the taxpayer who fails to collect the ICMS commits a crime as long as there is fraud. On that occasion, the Court judged the RHC 163.334 filed by clothing store owners in Santa Catarina denounced for not collecting ICMS between 2008 and 2010.

The established thesis was that “the taxpayer who consistently and with the intent of appropriation fails to collect the ICMS charged to the buyer of goods or services is subject to the penal type of Article 2, item II of Law 8137/1990”. This law defines crimes against the tax order. The aforementioned item says that it is a crime "to fail to collect, within the legal term, value of tax or social contribution, discounted or charged, as a taxable person of obligation and that should collect public coffers".

The head of the Legal Department of the Federation of Industries of the State of São Paulo (Fiesp), Hélcio Honda, warns that caution is needed in the definition of a debtor. “The figure of the stubborn debtor is pernicious, but she must have a cautious definition. You need to have another element besides default, ”he says. “And what is the other element? It is the willful figure of not paying the tax, the desire to harm the market. The subjective question of deceit is very important ”.

How a frequent debtor acts

The debtor often uses the slowness to have debts executed and the possibility of questioning tax collections to save time and obtain high rates of return. "The company establishes itself and is already structured to not pay tax, because it will have an illegal competitive advantage, a very high profit margin and will inhibit fair competition", says Edson Vismona, ETCO's CEO. "It is what happens in the most charged sectors, fuel, cigarettes, beverages."

The lawyer Luciano Godoy also explains that these products are more difficult to be inspected: “They [the regular debtors] go for products that are fast to consume. Cigarette and fuel, for example, you used it and there is no trace of the crime. Nobody is going to be a regular debtor, for example, making a refrigerator and a television ”.

With installments of taxes and questioning of collections, a company is able to operate smoothly for up to five years. “An installment discussion can take three, four years. In court, it will depend. There are thesis discussions that can take up to four or five years ”, says Gustavo Amaral, partner responsible for the tax area at Paulo Cesar Pinheiro Carneiro Advogados Associados. "And this is not necessarily linear, because an installment program may appear and break this sequence."

Special content: The fight against the persistent tax debtor

In the fuel sector, the figure of the heavy debtor is concentrated on the sale of ethanol, which has divided taxation on refining and distribution, which facilitates fraud.

"The beginning of all this is front companies, with the discourse of a good Christian, telling the ANP that they are starting with minimal capital ”, explains Carlo Faccio, director of Instituto Combustível Legal. “In parallel, they begin to make sales with interstate transactions and to accumulate debts. Except that until the [State's] Treasury identifies the non-payment, there is a delay of two to three years. ”

After that period, when the debtor is characterized as a regular debtor, the Finance departments are unable to exercise the right to collect from companies, which usually do not have equity and are registered with minimum capital.

This happens a lot with distributors, who depend on little capital to operate. "The debt is not charged, so everything that the company failed to collect over time becomes a profit to the detriment of the tax authorities and competitors," says lawyer Gustavo Amaral.

To continue in the activity, other companies are opened to do the same, only with a new name and registration. “There comes a time when the IRS takes action, suspends activity. But he [contumazante debtor] has, in parallel, created another CNPJ, and simply jumps from a company that he is going to abandon, moves on to another and follows his business ”, explains Edson Vismona, from ETCO.

The negative effects of the frequent debtor are contracted by the State, which earns less, and by the market in the sector in question.

“The effect on competition is a disruption of what would be the natural competition in that market,” says Eduardo Frade, partner at VMCA and former superintendent of Cade. "It generates a disincentive to the entry of new competitors, in addition to a series of exits, with a greater concentration of the market", he says. "There is also an adverse selection effect, an effect in which the agents who act against the rules are rewarded and those who act according to the rules are punished."

In the case of fuels, the final price of gasoline is up to R $ 0,90 per liter at stations that sell products derived from irregular chains. In ethanol, the variation reaches up to R $ 0,51, according to a study by the consulting firm Boston Consulting Group (BCG).

Article published on 31/08/2020 on the Jota Portal, in the Jota Discute session, which has the support of ETCO.

 

“We are going to work around the swamp”

The Brazilian tax system needs changes that value good taxpayers, fight the persistent tax debtors and correct specific problems in sectors that suffer unfair taxation competition, such as cigarettes, beverages and fuels. These were the main points defended by ETCO's executive president, Edson Vismona, at the Taxation in Brazil seminar.

He also recalled ETCO's participation in the approval and implementation of important projects to combat tax evasion in the country. He cited the implementation of physical control systems for the production of beverages and cigarettes, the approval of article 146-A of the Constitution, which authorized treating in a tougher way taxpayers who use illicit tax advantages against their competitors, and the creation of the Underground Economy Index, which has followed the evolution of the informal economy in Brazil since 2003.

Vismona also recalled the two manifestos that ETCO prepared, with proposals on taxation and public security, and which he personally delivered to the main candidates in the 2018 presidential elections.

The following are some proposals that he defended in his lecture:

Bypass the swamp

“In discussions at the ETCO tax group, I remembered the guidance that Abraham Lincoln gave his generals in the American Civil War: 'Gentlemen, if you come across a swamp, don't go in there, turn around'. When I hear the current debates on tax reform, that image comes to me. This can be a swamp, we are going to work around the swamp, because, when we get into this idea of ​​reform, everyone thinks: 'it will reduce the tax burden'. But without reforming the state? ”

“Nobody wants to lose. The State does not want to lose, the Union does not want to lose, the Municipality does not want to lose, we do not want to lose, companies, sectors. Then you walk to a game of ´lose you, I don´t´. That is, each one has a tax reform in mind. Against this background, the idea of ​​the swamp becomes increasingly clear. ”

Tax authorities

“We taxpayers want to keep up with our contributions to the tax authorities and we find all the difficulties. We are the country that spends the most time to fulfill tax obligations. We work for the state. And the State is looking: "Wrong, take a fine, 150% fine and I will take you to Criminal Justice". And then there was this maxim of the correct taxpayers: "I shouldn't, I deny it, but I pay". One of our associates, faced with the threat of taking a criminal report, paid, went to court and, after a few years, won. Look at the burden of this: you paid something you shouldn't have! And he had to go to court to argue. ”

What ETCO stands for

“We have proposals: a program to reduce bureaucracy. There is already a complementary bill, it was discussed in our tax group, with an emphasis on a single tax register, in the simplification of the processes of opening and closing companies, this is now happening with the MP for Economic Freedom; elimination of the requirement for a negative certificate; universal tax compensation; annual consolidation of legislation; and setting a deadline for responses, because the tax administration has no deadline, we do. ”

“Some PLs that we are suggesting: a radical reform of the tax process, there are already two PECs that are being discussed. Establishment of general tax procedural rules, with integration between administrative and judicial proceedings. Restructuring of tax administrative litigation bodies. Monophasia of the ICMS on fuel, as provided for in the Constitution. ”

Stop cigarette smuggling

“Our market is being delivered to the smuggler. Today, 54% of it is in the hands of smuggling. There has been a disproportionate increase in the past four years. Last year, the collection was lower than the tax evasion. Why is that? In Paraguay, the tax on cigarettes is 18%, in Brazil, 70% to 90%. The price difference is half. The low-income class only buys contraband products. Organized crime has already occupied this space. He finances himself with these billions that are evaded. We have to crack down on criminal organizations, but we need to look at the demand. The police say this: it is no use, just because of the repression, we will not change this situation. Our proposal is to maintain the tax burden, but to change the distribution of taxes: the premium brand tax is increased and each company creates a confrontation mark with a lower tax to occupy the smuggling space. It is the only proposal that we believe is feasible at the moment. And we want to move forward with it, because otherwise the projections already show that, next year, the market will already be 60% in the hands of smugglers, with an upward bias. ”

Fighting hard debtors

“The regular tax debtor structures the business so as not to pay tax, he makes money by not paying tax, he erodes competition by not paying tax, he seeks to discuss in all administrative and judicial instances, in all ways. And he conveys the image that he is a victim, he wants to be confused with an eventual tax debtor. He uses this maxim: 'I must, I do not deny and I do not pay'. When the tax authorities finally reach it, the company no longer exists, it has already closed, it is something that will simply get lost. There are billions of reais in the beverage, tobacco and fuel sectors. Our proposal is PLS 284/2017 which is being processed in the Senate. It is the other side of the coin: for the average debtor, we want the tax authorities to have effective collection mechanisms and to be able to use these mechanisms to prevent liabilities from growing in an absolutely unsustainable way. ”

Physical control of drinks

“The physical control of beverages was suspended by the IRS. There was gross corruption in the operation and the government decided to throw the child in with the bath water. Instead of maintaining, perfecting and ending corruption, they preferred to shut down the system, and that already has perverse effects on competition in the beverage industry. ”

Why does the Senate need to approve PLS 284/17?

Brazil needs to end the notorious industry of heavy duty debtors. The opportunity to accomplish this feat is now in the hands of the country's 81 senators, more precisely in the vote on Senate Bill 284/2017, which authorizes the creation of tougher rules against this perverse figure that corrodes the business environment and the tax collection of the Brazilian State.

Stubborn debtor is the name given to a defrauding type who sets up his company with the purpose of not paying tax. He uses this illicit advantage to practice prices below cost and gain market quickly. In addition, its strategy consists of using tricks to prolong the legal proceedings as much as possible, while diverting profits to other activities, keeping its business registered in the name of "oranges". When the State ultimately wins the case, it fails to collect the debt and the criminals start the same scheme again.

Regular debtors operate mainly in high-tax segments. In the fuel sector, its debts already exceed R $ 60 billion; in the case of tobacco, they exceed R $ 32 billion; in the case of beverages, R $ 4 billion. In these three areas alone, there are more than R $ 96 billion, about 10% of the annual savings expected with the pension reform.

Its unfair competition makes it impossible for companies that collect their taxes correctly and exclude investments. It was identified as one of the causes of the decision of large multinational groups in the fuel distribution sector to leave Brazil.

And why has it been so difficult to end this plague in the country? Basically, because the Brazilian legal system does not differentiate the debtor from other types of debtors and the malicious ones end up taking advantage of protection mechanisms that exist to guarantee the legitimate rights of debtors in good faith.

It is important to note that the problem here is not simply the duty imposed. Every company is subject to go through difficult times and run out of cash to pay taxes or other debts. Sometimes, it may happen that you fail to collect taxes properly, for a period, in order to catch up on debts in the future. But that understanding cannot be applied to the incumbent debtor.

Article 146-A of the Federal Constitution, approved by a constitutional amendment in 2003, authorized the State to create special taxation and inspection regimes for cases that cause competitive imbalances, making its adoption conditional on the approval of a specific complementary law by the Federal Senate. That is the purpose of PLS ​​284/2017, which has been in the House for two years, was approved by the Commissions on Economic Affairs and Transparency, Governance, Inspection and Control and Consumer Protection, and is ready to go to plenary.

The PLS makes an objective distinction between the three types of debtors: the eventual debtor, for whom nothing changes, the repeated debtor, who will also continue to have the current legal protections as long as he does not use the tax advantage to practice unfair competition, and the debtor stubborn, target of the law.

 “He is a criminal, and not a businessman, who organizes himself in order not to pay taxes and thereby obtain a competitive advantage, among others. To this end, it systematically violates the legal system, practicing numerous illicit acts, usually through the use of oranges, registration of addresses and false partners, invariably possessing insufficient assets to satisfy tax, labor obligations, etc. ”

The objective of PLS ​​284/2017 is to quickly stop the criminal action of incumbent debtors. The focus is on the defense of competitive ethics and legality, which are fundamental for business investment and economic development. “Once the contuma of the conduct is determined, it must be repressed, in a rigorous and exemplary manner, by means of legal sanctions that prevent the continuity of the agent's activities (interdiction of the establishment, revocation of registration in the taxpayer register), of preserving the Erárlo and the market, which has free competition as one of its fundamental principles, as an inseparable link of free initiative. ”

The project enumerates a series of measures that could be adopted specifically against regular debtors, such as the maintenance of uninterrupted inspection in the establishment; special control over tax collection, economic, equity and financial information; the compulsory installation of production, marketing and stock control equipment; among others.

The current text initially limits the scope of the law to the sectors of fuels, tobacco and beverages, which are the most affected by unfair competition from regular debtors, and has the support of the Brazilian Institute of Ethics in Competition (ETCO) and the main representative entities of these segments.

The topic is urgent. Brazil can no longer allow dishonest economic agents to continue destroying the business environment. Profit through illicit practice harms all Brazilians who depend on tax-financed public services. The solution lies with the Federal Senate.

Compliance programs can raise competition in heavily taxed sectors

Fuels, cigarettes and beverages are among the areas most affected by heavy debtors

The tax compliance programs developed by the government to tighten up enforcement against taxpayers with a higher risk of tax evasion mainly affect economic sectors that suffer a higher incidence of taxes. Entities point out that in the sectors of fuels, cigarettes and beverages, for example, there are companies that fail to pay taxes as a business strategy to artificially lower prices and compete for consumer preference unfairly. In addition to the tax benefits, concentrating enforcement on incumbent debtors would also improve competition in the market.

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